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Profit Efficiency of Farm Credit System Associations

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  • Collender, Robert N.
  • Nehring, Richard
  • Somwaru, Agapi

Abstract

Nonparametric profit frontiers are used to measure economic efficiency of Farm Credit System associations. Evidence of inefficiencies among Farm Credit System associations is evaluated by geographic regions. Results indicate that many associations are efficient given shortrun constraints imposed by fixed investments and nonaccrual loans. However, further consolidation of associations may result in savings to taxpayers and borrowers. Associations generally appear to be too small and too numerous for the system to attain longrun profit efficiency, despite considerable consolidation over the past decade. Legislative history of the Farm Credit System indicates that profit inefficiencies would be politically acceptable if they were the price of increased credit availability to the agricultural sector. However, profit-inefficient associations, except those in Texas, are not characterized by excessive lending, compared with profit-efficient associations.

Suggested Citation

  • Collender, Robert N. & Nehring, Richard & Somwaru, Agapi, 1991. "Profit Efficiency of Farm Credit System Associations," Staff Reports 278606, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerssr:278606
    DOI: 10.22004/ag.econ.278606
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    Cited by:

    1. Gregory McKee & Albert Kagan, 2019. "The differential impact of the Dodd–Frank Act on niche non-metro lenders," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(4), pages 291-301, December.
    2. Collender, Robert N., 1992. "Farm credit system outlook," Agricultural Outlook Forum Archive 1923 - 1997 326851, United States Department of Agriculture, Agricultural Outlook Forum.

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    Keywords

    Agricultural Finance; Financial Economics;

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