Market microstructure and the historical relationship between the US farm credit system, farm service agency and commercial bank lending

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Calum G. Turvey ◽  
Amy Carduner ◽  
Jennifer Ifft
Keyword(s):  
Market Microstructure ◽  
Credit System ◽  
Agricultural Credit ◽  
Agricultural Finance ◽  
Content Type ◽  
Demand Elasticities ◽  
The Us ◽  
Farm Credit ◽  
Farm Credit System

PurposeThe purpose of this paper is to investigate the market microstructure related to the Farm Credit System (FCS), Commercial Banks (CB) and Farm Services Administration (FSA). The commercial banks frequently call out the FCS as having an unfair advantage in the agricultural finance market place due to tax exempt bonds, and an implied guarantee of those bonds. This paper addresses the issue by examining the interrelationships since 1939, while addressing the historically distinctive roles that the FCS, CB and FSA have played in the US agricultural credit market.Design/methodology/approachThere are two components to our model. The first is the estimation of short and long run credit demand elasticities, as well as land elasticities. These are estimated from a dynamic duality model using seemingly unrelated regression. The point elasticity measures are then used as independent variables in least square regressions, combined with farm specific and related macro variables, for the Cornbelt states. The dependent variable is the year-over-year changes in paired FCS, CB and FSA loans.FindingsThe genesis of the FCS was to provide credit to farmers in good and bad years. Therefore, we expected to see a countercyclical relationship between FCS and CB. This is found for the farm crisis years in the 1980s but is not a continuous characteristic of FCS lending. In good times the FCS and CB appear to compete, albeit with differentiated market segmentation into short- and long-term credit. The FSA, which was established to provide tertiary support to both the FCS and CB, appears to be responding as designed, with greater activity in bad years. The authors find the elasticity measures to be economically significant.Research limitations/implicationsThe authors conclude that the market microstructure of the agricultural credit market in the US is important. Our analysis applies a broader definition of market microstructure for institutions and intermediaries and reveals that further research examining the economic frictions caused by comparative bond vs deposit funding of agricultural credit is important.Originality/valueThe authors believe that this is the first paper to examine agricultural finance through the market microstructure lens. In addition our long-term data measures allow us to examine the economics through various sub-periods. Finally, we believe that our introduction of credit and land demand elasticities into a comparative credit model is also a first.

Historical developments in agricultural finance and the genesis of America’s farm credit system

2017 ◽  
Vol 77 (1) ◽  
pp. 4-21 ◽  
Author(s):  
Calum G. Turvey
Keyword(s):  
Rural Communities ◽  
Banking System ◽  
Credit System ◽  
Agricultural Credit ◽  
Agricultural Finance ◽  
Content Type ◽  
Farm Credit ◽  
Farm Credit System ◽  
Historical Developments

Purpose The purpose of this paper is to provide a review of major historical developments in agricultural finance, with particular emphasis on agricultural credit. It reviews the development of Raiffeisen and related banks that emerged in Germany and Europe throughout the nineteenth century and how the cooperative banking system made its way into the banking system of the USA in the early twentieth century. The paper emphasizes the role of the state in the developing of agricultural credit, especially with respect to farm mortgages, securitization, and bond structures. Design/methodology/approach This paper presents a historical synthesis of historical literature on agricultural credit. Findings This paper shows the direct linkage between the developments in Raiffeisen credit cooperatives and the Farm Credit System (FCS) and details the emergence of the land banks, farm credit banks, agricultural bonds and the role of joint-stock banks in agricultural credit policy. Originality/value In total, 2016 marks the 100th anniversary of the passing of the 1916 Federal Farm Loan Act which set in motion the USs’ first Government Sponsored Enterprise and catalyzed the formation of the FCS as it operates today to provide credit to farmers and rural communities on a cooperative basis. Although there are a few wonderful books written on certain aspects of the FCS the story of how the FCS was initiated and the many struggles it faced up to the 1933 Act has not been told often enough. This paper tells the story of the evolution of agricultural credit that ultimately led to the formation of the FCS.

scholarly journals Some Evidence on the Relationship Between Loan Insurance and the Supply of Agricultural Credit From Commercial Banks

1980 ◽  
Vol 12 (2) ◽  
pp. 25-29
Author(s):  
L. Upton Hatch ◽  
Wesley N. Musser
Keyword(s):  
Small Business Administration ◽  
Credit System ◽  
Federal Programs ◽  
Agricultural Credit ◽  
Public Programs ◽  
Agricultural Finance ◽  
Public Agency ◽  
Farm Credit ◽  
Farm Credit System ◽  
Farmers Home Administration

Insured farm loans have evolved to be an important component of the federal role in the agricultural credit subsector. Currently, agricultural credit is supplied by three sets of institutions: (1) private firms and individuals, (2) the quasiprivate cooperative Farm Credit System, and (3) the federal public programs of the Farmers Home Administration (FmHA) and Small Business Administration. Statuatory authority currently limits federal programs to a residual role of lending to borrowers who cannot receive credit from the other segments. Though a large component of public programs consists of emergency loans in areas of economic disaster, the FmHA also makes farm operating and real estate loans to farmers who meet the statuatory requirements. The source of funds for some FmHA loans is federal appropriations and money market certificates. However, guaranteed loans have become an important component of FmHA programs. These loans are made in cooperation with other agricultural finance agencies. The public agency insures or guarantees repayment of the loan. The cooperating firm negotiates the loan and provides the funds. Usually the interest payment is below the current market interest rate structure.

scholarly journals Optimal Agricultural Credit Association Branch Office Locations

2003 ◽  
Vol 35 (1) ◽  
pp. 127-141 ◽  
Author(s):  
Timi M. Scaletta ◽  
Jeffrey R. Stokes
Keyword(s):  
Integer Programming ◽  
Optimal Number ◽  
Programming Models ◽  
Mixed Integer ◽  
Credit System ◽  
Agricultural Credit ◽  
Farm Credit ◽  
Farm Credit System ◽  
Branch Office ◽  
Credit Association

Since the farm financial crisis of the 1980s, Farm Credit System banks continue to merge and consolidate to enhance competitiveness. Two mixed-integer programming models of AgChoice Agricultural Credit Association (ACA), a recently merged ACA in Pennsylvania, were developed to determine the optimal number, location, and territory of branches. The approach suggests useful information can be determined regarding the reconfiguration process after bank mergers, especially given the fact that the current AgChoice ACA configuration is available for comparison purposes.

Is a revised mandate for the US farm credit system needed?

Agribusiness ◽  
1995 ◽  
Vol 11 (3) ◽  
pp. 291-296
Author(s):  
Charles H. Riemenschneider ◽  
David Freshwater
Keyword(s):  
Credit System ◽  
The Us ◽  
Farm Credit ◽  
Farm Credit System

scholarly journals Measuring the efficiency of the Farm Credit System

2014 ◽  
Vol 74 (1) ◽  
pp. 38-54 ◽  
Author(s):  
Trang Dang ◽  
David Leatham ◽  
Bruce A. McCarl ◽  
Ximing Wu
Keyword(s):  
Financial Crisis ◽  
Technical Efficiency ◽  
Relative Efficiency ◽  
Farm Income ◽  
Credit System ◽  
Content Type ◽  
Significant Difference ◽  
Farm Credit ◽  
Farm Credit System ◽  
The Impact

Purpose – The purpose of this paper is to develop information on the relative efficiency of Farm Credit System (FCS) lenders. Also the evolution of relative efficiency is examined as influenced by the biofuel boom, the financial crisis, and farm income increases. The paper aims to discuss these issues. Design/methodology/approach – A stochastic frontier production function is used to estimate technical efficiency of FCS banks and associations. Findings – A significant difference is found in efficiency between large and small associations and banks. Larger asset bases and management compensation are found to be positively associated with efficiency. Banks are found to have higher technical efficiency than associations (66-46 percent). Association efficiency is found to be increasing indicating likely effects of recent consolidation. The financial crisis was not found to have a significant effect with the bioenergy and farm income booms being likely countervailing forces. Research limitations/implications – Further work is needed on the impact of the biofuel boom, increases in farm income, and new regulations. Practical implications – The study provides information and indications of strategies for FCS management including additional consolidation. Originality/value – This does an updated assessment of FCS efficiency taking into account changes in consolidation, lending practices, and economic conditions. Implications are developed for management actions such as more consolidation. The study also uses a more advanced methodology compared to older studies.

Russia's Baltic pipeline nearly ready but risks remain

2021 ◽  
Keyword(s):  
Content Type ◽  
Bilateral Agreement ◽  
The Us ◽  
Nord Stream ◽  
The Way

Significance Despite this, Biden indicated no change in the US position after a bilateral agreement with Germany effectively paved the way to completing the pipeline. Technically, Nord Stream 2 could begin partially operating in October. Impacts The recent spike in European gas prices to levels unseen since 2008 reinforces the case for Nord Stream 2's speedy completion. EU energy diversification, with a focus on renewables, poses long-term questions about the viability of both the Nord Stream pipelines. From October, Hungary will switch to Gazprom gas supplied via Serbia and Austria instead of through Ukrainian pipelines.

scholarly journals Effects of agricultural credit on wheat productivity of small farms in Sindh, Pakistan

2018 ◽  
Vol 78 (5) ◽  
pp. 592-610 ◽  
Author(s):  
Abbas Ali Chandio ◽  
Yuansheng Jiang ◽  
Feng Wei ◽  
Xu Guangshun
Keyword(s):  
Wheat Yield ◽  
Considerable Proportion ◽  
Small Scale ◽  
Small Farms ◽  
Short Term ◽  
Agricultural Credit ◽  
Data Set ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to evaluate the impact of short-term loan (STL) vs long-term loan (LTL) on wheat productivity of small farms in Sindh, Pakistan. Design/methodology/approach The econometric estimation is based on cross-sectional data collected in 2016 from 18 villages in three districts, i.e. Shikarpur, Sukkur and Shaheed Benazirabad, Sindh, Pakistan. The sample data set consist of 180 wheat farmers. The collected data were analyzed through different econometric techniques like Cobb–Douglas production function and Instrumental variables (two-stage least squares) approach. Findings This study reconfirmed that agricultural credit has a positive and highly significant effect on wheat productivity, while the short-term loan has a stronger effect on wheat productivity than the long-term loan. The reasons behind the phenomenon may be the significantly higher usage of agricultural inputs like seeds of improved variety and fertilizers which can be transformed into the wheat yield in the same year. However, the LTL users have significantly higher investments in land preparation, irrigation and plant protection, which may lead to higher wheat production in the coming years. Research limitations/implications In the present study, only those wheat farmers were considered who obtained agricultural loans from formal financial institutions like Zarai Taraqiati Bank Limited and Khushhali Bank. However, in the rural areas of Sindh, Pakistan, a considerable proportion of small-scale farmers take credit from informal financial channels. Therefore future researchers should consider the informal credits as well. Originality/value This is the first paper to examine the effects of agricultural credit on wheat productivity of small farms in Sindh, Pakistan. This paper will be an important addition to the emerging literature regarding effects of credit studies.

scholarly journals China’s emerging partnership network: what, who, where, when and why

2019 ◽  
Vol 3 (2) ◽  
pp. 66-81 ◽  
Author(s):  
Quan Li ◽  
Min Ye
Keyword(s):  
Cold War ◽  
Design Methodology ◽  
Content Type ◽  
The Us ◽  
China’S Foreign Policy ◽  
Using Data ◽  
Partnership Network ◽  
The Cold War ◽  
Vast Network

Purpose The purpose of this paper is to explore and test the motivation behind the evolution of China’s vast network of partnerships around the globe since the end of the Cold War. Design/methodology/approach After combing through 24 types of partnerships with 78 countries, the authors empirically tested four hypotheses using data from Correlates of War and World Bank. Findings The analysis indicates that China’s choice to build such an elaborate network is not random. On the contrary, it is largely determined by three factors: the need to counter the US pressure; the necessity of maintaining peace and stability along its borders and achieving the long-term goal of modernization. Originality/value The research is among the first attempts to comprehensively test the possible motivations behind China’s partnership building efforts and provides a stepping stone for analyzing this important aspect of China’s foreign policy.

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