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A federal appeals court on Wednesday ruled that bankrupt Florida grocery store owners could discharge debts owed to a produce supplier, resolving a "tug-of-war" between U.S. bankruptcy law and a federal law intended to protect companies delivering perishable foods, Reuters reported. Spring Valley Produce Inc. had appealed a bankruptcy court order allowing Central Market of FL Inc. to discharge a $261,504.15 debt for produce that Central Market never paid for. Spring Valley argued that the Perishable Agricultural Commodities Act (PACA) overrules bankruptcy law's normal discharge of debts, because PACA makes it illegal for a buyer to fail to make prompt payment for produce. PACA automatically creates a "statutory trust" when produce is delivered, and Spring Valley argued that Central Market was a fiduciary of the PACA trust created by its deliveries. Because Central Market was a fiduciary, its owners' debts to Spring Valley were not dischargable under normal bankruptcy rules, Spring Valley argued. The U.S. Court of Appeals for the 11th Circuit disagreed, saying that PACA "imposes some trust-like duties," but it did not qualify for the fiduciary exemption in bankruptcy law. Specifically, PACA does not require a produce buyer to keep trust assets segregated from its other assets or prevent the buyer from using the trust assets for other purposes, the 11th Circuit ruled. The 11th Circuit said that its decision balanced "two statutes with competing interests" without eroding PACA's protections for produce suppliers. Produce suppliers can ask a court to force the disgorgement of payments made in breach of the PACA trust, and they are entitled to the highest priority for repayment in bankruptcy, the 11th Circuit wrote. "Allowing PACA debtors to be freed from personal liability for their debts through bankruptcy discharge promotes the overarching goal of the Bankruptcy Code of providing debtors with a fresh start," the 11th Circuit wrote. "At the same time, PACA still provides significant benefits to unpaid produce sellers."

Congestion on America’s railroads is disrupting operations for farmers and agriculture companies, industry officials said, potentially pushing up food prices, the Wall Street Journal reported. Delayed trains and scarce railcars are impeding crop shipments this spring, causing grain storage facilities to fill up, backing up fertilizer shipments and temporarily shutting down production at ethanol producing plants, company executives said. Railroad operators said they are working to fix the problems but struggling to find enough workers. The railroad slowdown has grain companies looking for other ways to move farm commodities across the country, leading to higher transportation costs that company officials said will ultimately increase food prices for consumers. Food globally is already becoming more expensive, with food makers paying more for fuel, ingredients and labor. “We are seeing a disruption across the industry from top to bottom,” said Todd Becker, chief executive of Green Plains Inc., a major producer of ethanol and animal feed ingredients. “Transportation is a big driver of food prices.”

For Brandon Smith, a fourth-generation cattle rancher from Texas, the $1.9 trillion stimulus package that President Biden signed into law nearly a year ago was long-awaited relief, the New York Times reported. Little did he know how much longer he would have to wait. The legislation included $4 billion of debt forgiveness for Black and other “socially disadvantaged” farmers, a group that has endured decades of discrimination from banks and the federal government. Mr. Smith, a Black father of four who owes about $200,000 in outstanding loans on his ranch, quickly signed and returned documents to the Agriculture Department last year, formally accepting the debt relief. He then purchased more equipment for his ranch, believing that he had been given a financial lifeline. Instead, Mr. Smith has fallen deeper into debt. Months after signing the paperwork he received a notice informing him that the federal government intended to “accelerate” foreclosure on his 46-acre property and cattle if he did not start making payments on the loans he believed had been forgiven. Black farmers across the nation have yet to see any of Mr. Biden’s promised relief. While the president has pledged to pursue policies to promote racial equity and correct decades of discrimination, legal issues have complicated that goal. In May 2021, the Agriculture Department started sending letters to borrowers who were eligible to have their debt cleared, asking them to sign and return forms confirming their balances. The payments, which also are supposed to cover tax liabilities and fees associated with clearing the debt, were expected to come in phases beginning in June. But the entire initiative has been stymied amid lawsuits from white farmers and groups representing them that questioned whether the government could offer debt relief based on race. Courts in Wisconsin and Florida have issued preliminary injunctions against the initiative, siding with plaintiffs who argued that the debt relief amounted to discrimination and could therefore be illegal. A class-action lawsuit against the U.S.D.A. is proceeding in Texas this year. The Biden administration has not appealed the injunctions but a spokeswoman for the Agriculture Department said that it was continuing to defend the program in the courts as the cases move forward.

American farmers are paying significantly higher prices for their weed-killing chemicals, crop seeds, fertilizer, equipment repairs and seasonal labor, eroding some of 2021’s windfall from rising crop prices. Higher farm costs could help push up grocery bills further in 2022, analysts say, following a year in which global food prices rose to decade highs, the Wall Street Journal reported. Supply-chain constraints and staffing problems are leading to higher prices for products and supplies across a variety of industries, especially food. U.S. inflation hit its fastest pace in nearly four decades last year. Food prices surged 7% in January, the sharpest rise since 1981, the Labor Department on Thursday said, as meat and egg prices continued to climb at double-digit rates. A rally in prices for agricultural commodities such as corn and soybeans, which kicked off in mid-2020, pushed up incomes for U.S. farmers and led them to spend more freely on farmland and machinery. In 2021, U.S. farms’ net income was estimated to be about $117 billion, up 23% from 2020, according to the U.S. Department of Agriculture. Even as crop prices remain high, supply costs are expected to outpace the price of agricultural goods in 2022, according to a January report from the Federal Reserve Board. Net income for farmers in Kansas is estimated to fall 65% from a year ago, according to a January study from Kansas State University. Read more. (Subscription required.) 

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Farm bankruptcies dropped by more than half last year as the boom in commodity prices and soaring exports buoyed profits, Bloomberg News reported. Only 276 operations across the country filed for chapter 12 bankruptcy, designed for farms, the lowest number in at least a decade, according to an analysis of court data by the American Farm Bureau Federation. In 2020, there were a near-record 560 filings, according to the Farm Bureau, despite three years of federal bailouts for trade war and Covid losses. American farmers’ profits soared last year to $119 billion, their highest since 2013, according to the U.S. Agriculture Department. U.S. farm exports set a record in 2021 as China boosted purchases by 25% and Mexico by 39%. Read more. 

The unique aspects of farm bankruptcies, including significant tax benefits, are detailed in Chapter 12 from A to Z: A Guide to Bankruptcies of Family Farmers and Family Fishermen now available for purchase at the ABI Store.