Guest editorial: Nontraditional Credit in U.S. Agriculture

Abstract

We are pleased to recognize the efforts of the economists who contributed to the Agricultural Finance Review's special issue on Nontraditional Credit in US Agriculture. The group's efforts were led by Brady Brewer (Purdue University) and Jennifer Ifft (Kansas State University) who circulated the original call that resulted in these 11 articles from 34 different authors. USDA provided financial supportthrough a cooperative agreementfor non-USDA authors not otherwise fully supported by their home agency or organization.Understanding the sources of credit for agricultural production is critical for regulators and policymakers concerned with the stability of financial institutions, agricultural production and the welfare of farmers. Research in this special issue sheds new light on nontraditional farm credit by exploring the scope and range of this lending, the services provided to farmers, and the role this credit plays in the agricultural economy.Several of the articles included herein draw heavily on the Agricultural Resource Management Survey (ARMS) and the Farm Income and Wealth data series, two of USDA's premiere data products. Every year since 1996, ARMS has asked a nationally representative sample of farmers and ranchers a series of detailed questions about their outstanding loan balances, including questions on lender type that underlie one definition of a nontraditional lender. ARMS-based aggregate measures of nontraditional lender activity are included in the sector balance sheet within the Farm Income and Wealth data series. Stretching back even longer (to 1960), USDA's farm sector balance sheet provides loan balances from regulatory and administrative sources alongside an "individuals and others" line item for debt and reflecting the size of the nontraditional sector over time. This research, in addition to highlighting the role of nontraditional lenders, explicitly underlines the value of USDA's commitment to long term data collection in order to understand the structure and dynamics of the agricultural sector.Motivation The financing of production agriculture has become increasingly diverse, in terms of credit delivery and terms, as well as lender type or source of credit. Yet, most agricultural finance research still focuses on traditional agricultural lending relationships. The goal of this special issue is to advance the literature on non-traditional finance in US agriculture and lay a foundation for future research, while also providing insights for farm managers, industry and policymakers. Navigating complex financing options is an integral component of modern farm management. From a policy perspective, financial regulators, such as regional Federal Guest editorial 205

Crop insurance's impact on commercial bank loan volumes: Theory and evidence

“…In addition, our characterization of agricultural lending is subject to a number of assumptions which could be addressed by future research. For example, our analysis would benefit from more detailed information on commercial bank loan origination, as well as detailed lending information from other types of lenders, including Farm Credit and other nonbank lenders (Brewer et al, 2022). Given the proliferation of crop insurance in other countries, including in developing nations (Afriyie-Kraft et al, 2020), future research may draw from administrative and other data sources from outside of the US.…”

“…For clarity, we refer to these loans as "production loans." The majority of equipment loans are provided by implement manufacturers and dealers (Brewer et al, 2022).…”

“…Only production loans, or loans not secured by real estate, are used in this study, as this is the type of lending most directly influenced by crop insurance (Ifft et al, 2015). For clarity, we refer to these loans as “production loans.” The majority of equipment loans are provided by implement manufacturers and dealers (Brewer et al, 2022).…”

Factors that influence bank loans for agriculture in Romania

“…Employment on the farm. Understanding the sources of agricultural production credit is critical for regulators and policymakers concerned with the stability of financial institutions, agricultural production, and farmer welfare (Brewer et al, 2022). It was established that the expansion of the use of the loan contract in agriculture is a necessary lever for increasing the efficiency of production, the formation and constant restoration of a competitive technological base in modern conditions, and the further development of the entire agro-industrial complex (Artemenko et al, 2022).…”