Farm income and output and lending by the farm credit system

Abstract

Purpose The purpose of this paper is to provide evidence of the positive impact of the FCS lending on farm incomes which should be useful to policymakers as they consider reforms and further support for this 100-year-old major agricultural lender. Design/methodology/approach The authors construct a panel for the 1991-2010 period from the FCS financial statements and evaluate how lending by the FCS institutions has affected farm incomes and farm output. The authors use fixed effects estimations and control for credit by other agricultural lenders as well as the stock of capital, prices, and interest rates. Since previous work suggests that rural financial markets are segmented and the FCS serves larger full-time farmers with mostly real-estate backed loans, the authors evaluate the impacts of farm real-estate backed loans and of short-term agricultural loans separately for a shorter period for which the data is available. The authors also perform robustness checks with alternative estimation techniques. Findings The authors found a positive association between credit by the FCS institutions and farm income and output. The magnitude of the estimated impact is larger during the 1990s than in the 2000s. Research limitations/implications The positive link between the FCS institutions’ credit and farm incomes and output supports the notion that the FCS lending was beneficial to farmers. The evidence also supports the segmentation hypothesis of rural financial markets. The financial reports data for 1991-2010 are from the ACAs and FLCAs aggregated on the regional level because there is no clear way to classify FCS lending to a more disaggregate level like the state. The authors also assemble and analyze a state-level data set that contains state-level balance sheet data for the period 1991-2003. Originality/value The authors are not aware of another work that directly links (real estate and non-real estate) credit by FCS institutions to agricultural output and farm incomes.

Faktor-Faktor yang Mempengaruhi Permintaan Kredit Program KKPE dan KUR Sektor Pertanian di Indonesia

“…Hasil tersebut telah sesuai dengan penelitian (Nadolnyak et al, 2017) bahwa nilai output berpengaruh postif dengan permintaan kredit. Didukung dengan hasil penelitian Onal, Darmawan, & Jhonson, (2015) yang menyebut bahwa pendapatan pertanian meningkat dengan adanya peningkatan ketersediaan kredit bersubsidi kepada petani kecil.…”

Analysis of Credit Access, U.S. Agricultural Productivity, and Residual Returns to Resources

“…Although often considered mainly a developing country issue, prior studies have concluded that the U.S. farms also face binding and non-negligible credit constraints (e.g., Briggeman, et al, 2009b;Chaddad et al, 2005;Hartarska and Nadolnyak, 2012;Mishra et al, 2008). Limited credit has been found to adversely impact the U.S. farm income and output (Briggeman, et al, 2009b;Nadolnyak et al, 2017), rural economic growth (Hartarska, et al, 2015), Tennessee small farms' financial performance (Khanal and Omobitan, 2020), amount of farm inputs used (Kumar et al, 2013), Midwest grain yields (Butler and Cornaggia, 2011), and farm efficiency (Chavas and Aliber, 1993). Mugera and Nyambane (2015) observed that the technical efficiency of broadacre farms (large-scale agricultural or pastoral enterprises that produce grains, oilseeds, or other crops or graze livestock for meat or wool) in Western Australia was positively related to short-term debt.…”

Rural Finance, Capital Constrained Small Farms, and Financial Performance: Findings from a Primary Survey

“…Moreover, there is also segmentation in the rural financial market (Nadolnyak, Shen, and Hartarska, 2017). The major financial institutions-Farm Credit System (FCS) and commercial banks are considered the major lenders for agricultural loans in the United States-tend to serve well-equipped farmers with a high degree of credibility, while farmers with lower incomes with low-collateral ability face significant challenges.…”