Report Of Survey On Financing Hedged Crops In East Central Illinois

This report summarizes results from a survey designed to determine the lending policies of banks and production credit associations in a 26 county area in east central Illinois with regard to farmers who hedge their crop production. The survey was to see if hedging aids the farmer in borrowing money, and if there is a relationship between size and type of credit agency and the likelihood of a positive credit response to hedging. Findings from the survey are based on 145 responses, 44.2 percent of lenders who received the questionnaire. Thirteen more lenders responded but reported no farm customers. One additional response was not sufficient for analysis. More than half the 145 respondents (77) said they had loaned to farmers who pledged hedged corn and/or soybeans as collateral. Sixty-eight indicated how hedging affects credit. About 70 percent of those respondents (48) said they wouli loan more on hedged than on non-hedged crops. Eighteen percent (14) reported loans to hedged farmers that would not have been made had the applicant not been hedged. However, among those so reporting, only 21 percent (15) would commit themselves to more than requirements to meet margin calls. No significant difference was found among size and type of lenders in the effects of hedging on credit limits. However, this finding may be biased by non-response. Small banks were disproportionately numerous among non-responders, perhaps because they have had fewer applicants for loans to financed hedged crops. The extent of such bias is not know.