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Impact of Lower, More Volatile Net Farm Incomes, and Higher Interest Rates on Repayment Risk

Author

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  • Banard, Freddie L.
  • Yeager, Elizabeth A.

Abstract

Real returns to farm operators have been at the highest level since 1973. However, indications from the USDA and Federal Open Market Committee are that returns are not projected to remain at those levels and interest rates will rise in the next decade. This paper evaluates the potential impact on repayment risk of three interest rates, three levels of leverage, and eight deviations from a base situation. Results indicate as the level of leverage and interest rate increased, the business became more susceptible to repayment risk, but even at moderate interest rates, increasing levels of leverage should be viewed with caution. Freddie

Suggested Citation

  • Banard, Freddie L. & Yeager, Elizabeth A., 2014. "Impact of Lower, More Volatile Net Farm Incomes, and Higher Interest Rates on Repayment Risk," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2014, pages 1-20.
    • Handle: RePEc:ags:jasfmr:197095
    DOI: 10.22004/ag.econ.197095
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    File URL: https://ageconsearch.umn.edu/record/197095/files/401-Barnard_reduced.pdf
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    References listed on IDEAS

    as
    1. Jason Henderson & Nathan Kauffman, 2013. "The wealth effect in U.S. agriculture," Main Street Economist, Federal Reserve Bank of Kansas City, issue 1.
    2. Unknown, 2014. "Department Publications 2013," Publications Lists 206935, University of Minnesota, Department of Applied Economics.
    3. Barnard, Freddie L. & Ellinger, Paul N. & Wilson, Christine A., 2010. "Measurement Issues in Assessing Farm Profitability through Cash Tax Returns," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2010, pages 1-11.
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    Cited by:

    1. Barnard, Freddie L. & Yeager, Elizabeth A., 2017. "Evaluating Effectiveness of Operating Strategies and Loan Term Changes on Repayment Capacity," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2017.

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    Keywords

    Farm Management; Financial Economics;

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