Analysis of Market Segmentation in Farm Credit Markets
AbstractAgricultural credit markets are dominated by two institutional retail lender groups, the cooperative Farm Credit System (FCS) and commercial banks. Together these two lender groups supply 70 percent of the farm sector’s total credit needs. This analysis uses USDA’s 2001 and 2002 Agricultural Resource Management Survey to examine whether these two lender groups were serving different segments of the farm credit market. Regulatory, legislative, structural, and competitiveness factors are expected to influence market segmentation. National estimates made using a binomial logit model indicate that the National farm credit market is segmented. When compared to commercial bank lending in 2001 and 2002, the FCS’s lending was more focused on full-time commercial farms that were less heavily indebted, more profitable, and had greater debt repayment capacities. The FCS was also more likely to supply credit to young and beginning farmers and to farms located in areas having access to a FCS office, but where few agricultural banks were located.
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Bibliographic InfoPaper provided by Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition in its series Proceedings: 2003 Regional Committee NCT-194, October 6-7, 2003; Kansas City, Missouri with number 132407.
Date of creation: 2003
Date of revision:
Agricultural Credit Markets; Market Segmentation; Farm Credit System; Agricultural Banks; and Farm Lenders.; Agricultural Finance;
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