Research Accomplishment Reports 2010

Agricultural and Rural Finance Markets in Transition (NC1014, NC221, NCT-194)

A. Katchova
Department of Agricultural Economics

 

Non-Technical Summary

The goal of this project is to understand and evaluate the recent changes in agricultural and rural finance markets and provide recommendations seeking improvements in programs and policies affecting the well-being of farm and rural households. We will conduct a series of studies addressing the changing structure of the agricultural sector. Several research projects will address the credit risks faced by agricultural lenders and measure the impacts of various government and risk management programs. Upon completion of the project, insights will be gained to ultimately improve the functioning of agricultural and rural financial markets. Producers, rural residents, and businesses should benefit through increased performance and reduced business risk. The lending sector will become more stable and better prepared to face future policy, portfolio and structure-related challenges.

2010 Project Description

The outputs for this project relate to the following goals and objectives:

1) to determine the effects of changes in federal and state policies affecting agriculture on the financial and economic performance of farms, agribusinesses and rural financial markets,

2) to determine the effects of market, policy, and structural change in the agricultural and financial market sectors on the financial soundness, safety, and management of financial institutions that supply capital to agriculture, and

3) to evaluate the management strategies, capital needs, and financial performance required for the long-term sustainability of firms in the food and agribusiness sector.

The research was disseminated through publications in refereed journals and professional conferences.

2010 Impact

Several studies were conducted to understand and evaluate the recent changes in agricultural and rural finance markets. In a series of related studies, the loan portfolio performance of a lender is evaluated and the credit worthiness and repayment capacity of farmers are examined. The results help lenders to better understand the credit risks they are facing when making loans.

In another set of related studies, we examine the competitiveness of agricultural contracts particularly when there are other processors in the area or when the processors are cooperatives or privately-owned firms. We find that agricultural processors do not exercise market power regardless of the availability of other processors in the area or the type of processor, which has important implications for the competitiveness of the agricultural sector.

2010 Publications

Collier, B., A.L. Katchova, and J. Skees. 2010. "Loan Portfolio Performance and El Nino, an Intervention Analysis." Agricultural Finance Review, in print.

Durguner, S., and A.L. Katchova. 2010. "Repayment Capacity of Farmers: A Balanced Panel Data Approach." Journal of Applied Economics and Policy, in print.

Katchova, A.L. 2010. "Agricultural Contracts and Alternative Marketing Options: A Matching Analysis." Journal of Agricultural and Applied Economics 42:1-6.

Katchova, A.L. 2010. "Agricultural Cooperatives and Contract Price Competitiveness." Journal of Cooperatives 24:2-12.

Paulson, N.D., A.L. Katchova, and S.H. Lence. 2010. "An Empirical Analysis of the Determinants of Marketing Contract Structures for Corn and Soybeans." Journal of Agricultural and Food Industrial Organization 8, 4: 1-23.

Durguner, S. and A.L. Katchova. 2010. "How the Measure of Creditworthiness Differ Among Livestock and Crop Farm Businesses?" The Journal of American Academy of Business 15:307-312.