On a recent webcast, one participant asked, “Given the current financial stress on many farms and ranches do you anticipate an increase in divorce rates; and will that rate be greater among spouses with no farming background?” Let’s examine the different correlations and factors surrounding these interesting questions.   

First, divorce is a serious, emotional and deeply personal process through which many people struggle for various reasons, not just financial stress from the business. However, second only to medical issues, divorce is the leading cause behind business bankruptcy across all societies. Thus, as they relate to agriculture’s current economic climate, financial stress and marital tensions are undeniably linked. 

Yet, marital issues often begin during the more positive economic times. A good example is the recent agricultural economic supercycle that changed both business and personal priorities. Family living withdrawals doubled during the 2008 to 2012 cycle and nonfarm capital expenditures surged to an all-time high. Some became entangled in the undisciplined pursuit of more, or too many choices. Now, with the economic reset well into its fourth year, reduced living expenses and tight budgets are most certainly adding to financial and family stress. 

It is interesting that much of the discussion on this question focused on the younger generations, but in actuality, divorce is prevalent among the Baby Boomer and Veteran Generations as life priorities change.  As a result, some lenders are asking for further guarantees in buy-sell agreements and even prenuptial contracts for others. 

Often the division of assets and divorce negotiations compound already heightened emotions and stress, taking time and energy away from the operation of a successful business. In today’s economic reality of tight margins, this type of distraction can be enough to push the business over the edge.

Next, the participant’s question regarding the nonfarm background merits further examination.  It is interesting that many point to a spouse’s lack of familiarity with farming for the apparent disconnect.  Yet, is it the agricultural background that is missing, or an overall lack of clarity on owning and operating a small business?  When teaching small business and entrepreneurship classes both at Cornell and Virginia Tech Universities, I heard several speakers highlight factors such as a lack of regular working yours (and often long hours), the uncertainty of income, and family issues inside the business as prominent in divorce.  In addition, the use of technology and social media commonly exasperate issues while reducing face-to-face communication.

Of course, divorce most often comes from a combination of factors, and perhaps all (or none) of those mentioned above. The emotional and financial fall out make divorce a significant risk factor for credit accounts and the exposure of lending portfolios, which places marital tensions and financial problems on the radar screen for today’s agricultural lenders.  As couples and lenders attempt to navigate tough financial and emotional decisions, Dr. Michael Hester, pastor and counselor in Asheville, North Carolina, gives the best advice. He recommends a three-fold approach of “time, talk, and touch” as the ways to address issues and tensions inside a marriage because these foundational relationships clearly impact the fortune of both business and life.