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Farm income and output and lending by the farm credit system

Author

Listed:
  • Denis Nadolnyak
  • Xuan Shen
  • Valentina Hartarska

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.

Suggested Citation

  • Denis Nadolnyak & Xuan Shen & Valentina Hartarska, 2017. "Farm income and output and lending by the farm credit system," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 77(1), pages 125-136, May.
    • Handle: RePEc:eme:afrpps:afr-03-2016-0020
    DOI: 10.1108/AFR-03-2016-0020
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    Citations

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    Cited by:

    1. Omobolaji Omobitan & Aditya R. Khanal, 2022. "Examining Farm Financial Management: How Do Small US Farms Meet Their Agricultural Expenses?," JRFM, MDPI, vol. 15(3), pages 1-15, March.
    2. Hartarska, Valentina M. & Zhang, Jingfang & Nadolnyak, Denis A., 2023. "Scope Economies from Rural and Urban Microfinance Services," 2023 Annual Meeting, July 23-25, Washington D.C. 335439, Agricultural and Applied Economics Association.
    3. Valentina Hartarska & Jingfang Zhang & Denis A. Nadolnyak, 2023. "Scope economies from rural and urban microfinance services," Southern Economic Journal, John Wiley & Sons, vol. 89(4), pages 1138-1167, April.
    4. Jared Hutchins, 2023. "The US farm credit system and agricultural development: Evidence from an early expansion, 1920–1940," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(1), pages 3-26, January.

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