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The Supply and Demand of Agricultural Loans

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Abstract

Credit plays a critical role in the agricultural sector, but many studies suggest that farmers are credit constrained. We examine the degree to which changes in non-real-estate agricultural loans at commercial banks are driven by changes in supply and demand, using information provided by agricultural lending surveys conducted by the Federal Reserve Banks of Chicago, Kansas City, and Minneapolis. Building on recent studies of loan officer opinion surveys, we estimate the changes in agricultural loan supply and demand using an unbalanced panel of 1,024 banks across 191 quarters (2002:Q1–2021:Q2). The survey responses provide instruments of “pure” supply and demand changes that allow us to examine fluctuations in bank-level agricultural loan volumes. We find that changes in the volume of non-real-estate farm loans at commercial banks are principally driven by changes in excess demand for loans. In addition, we demonstrate that excess loan demand is countercyclical to aggregate farm income.

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  • Ty Kreitman & Todd Kuethe & David B. Oppedahl & Francisco Scott, 2022. "The Supply and Demand of Agricultural Loans," Research Working Paper RWP 22-06, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:94521
    DOI: 10.18651/RWP2022-06
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    More about this item

    Keywords

    Agricultural lending; Credit demand and supply; Bank lending survey;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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