Published: August 26, 2026 | Category: Economics

A years-long squeeze on crop margins meets a fresh energy shock, and the strain is now showing up in court filings.

US family-farm bankruptcies climbed to a multi-year high in the year to June, with 336 Chapter 12 filings recorded in the 12 months to June 30, up from 282 a year earlier, according to federal courts data. The increase lands as farmers absorb a fresh spike in diesel and fertilizer costs tied to the conflict with Iran and disruption at the Strait of Hormuz, on top of several seasons of weak crop prices and thinning working capital.

Chapter 12 is the bankruptcy category reserved for family farms and fisheries, and its use is watched closely as a lagging gauge of financial distress across US agriculture. Monthly filings hit a six-year high in April, and the annual total has now reversed a five-year decline that followed a 2019 peak.

Researchers at the University of Illinois wrote in August that the recent rise reflects how “lower commodity prices, elevated interest rates, high input costs and tighter operating margins accumulated over previous production cycles are now appearing in court filings and farm credit portfolios.” In other words, the stress predates this year’s energy shock.

The underlying margin picture is deteriorating. The American Farm Bureau Federation, an industry group, projects that farmers of nine major crops will run a shortfall of $32bn against costs in 2027, before federal assistance, up from $31bn this year. That would mark a sixth consecutive year of negative returns over total costs for most major row crops. The Farm Bureau expects corn losses to widen to $167 an acre in 2027 from $131 this year, and soybean losses to $138 an acre from $80.

Against that backdrop, the jump in fuel prices carries more weight than its headline share of costs suggests. Diesel is essential to farm operations because the engines generate more power and the fuel stores more safely than gasoline, and the US Department of Agriculture estimates farmers spent $15.6bn on fuel last year, $10bn of it on diesel. The national average diesel price climbed above $5.45 a gallon in mid-August, a record for the season, according to AAA, and is up sharply over the past year.

Analysts caution that the raw price move is not, on its own, the problem. Diesel accounts for roughly 2 per cent of the $490bn in US farm expenditures, so even a 50 per cent rise adds only about a percentage point to production costs. The difficulty is the balance sheet it lands on. The USDA forecasts inflation-adjusted net farm income falling 2.6 per cent this year, with working capital down 9.2 per cent.

“A 1 per cent cost increase against a 9.2 per cent working-capital decline is a different proposition than the same increase against a healthy balance sheet,” Jim Wiesemeyer, an analyst at Ag Bull, wrote in a recent note. Tom Kloza, chief energy adviser at Gulf Oil, told the Financial Times the diesel surge had already created a “quiet crisis” that would ripple through to consumers.

Fertilizer, a larger line item at about 7 per cent of expenditures, adds to the strain. Prices reached records in the spring, when a Farm Bureau survey found 70 per cent of farmers could not afford all the fertilizer they needed, and have since eased. But they remain elevated, with seven of the eight major US fertilizers tracked by AgroLatam still costing more than a year ago. Jacqui Fatka, an economist at agribusiness lender CoBank, wrote that the industry “should prepare for fertilizer costs to remain structurally higher, and more difficult to manage, through the next several crop years.”

Relief may come from Washington, though not on the harvest’s timetable. Senate Republicans are weighing a war-spending package that includes about $12bn in aid for farmers, while a longer-term farm bill setting future subsidies remains stalled. For farms already operating through negative margins, the sequencing matters: the crops will not wait for Congress.

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