Annual/Termination Reports:

[11/23/2004] [10/17/2005] [02/24/2006] [12/12/2007] [11/13/2008] [11/18/2009]

Report Information

Participants

Brief Summary of Minutes

Accomplishments

Publications

Impact Statements

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Report Information

Participants

Bruce Ahrendsen (University of Arkansas), Ross Anderson (AgriBank), Anna Arkhiereeva (University of Minnesota (visitor)), Andy Behrens (University of Minnesota), Michael Brady (Ohio State University), Theodore Covey (ERS-USDA), Lisa DeClark (Federal Reserve Bank of Minneapolis), Matthew Diersen (South Dakota State University), Bruce Dixon (University of Arkansas), Dimitrina Dohcheva (University of Minnesota (visitor)), Paul Ellinger (University of Illinois), Cesar Escalante (University of Georgia), Allen Featherstone (Kansas State University), John Gardner (University of Missouri), Dan Glienke (Land O'Lakes Finance Company), Brent Gloy (Cornell University), Mike Gunderson (Purdue University), Cole Gustafson (North Dakota State University), Amy Hagerman (Texas A&M University), Valentina Hartarska (Auburn University), Larry Janssen (South Dakota State University), Zhu Jianhua (Iowa State University), Robert Jolly (Iowa State University), Ani Katchova (University of Illinois), Steve Koenig (USDA/FSA), Don Won Lee (South Dakota State University), Sergio Lence (Iowa State University), Driss Mehouachi (University of Minnesota (visitor)), Richard Meyer (Ohio State University), Ashok Mishra (ERS-USDA), Mitchell Morehart (ERS-USDA), Charles Moss (University of Florida), William Nganje (North Dakota State University), Raphael Onyeaghala (Southwest Minnesota State University), Glenn Pederson (University of Minnesota), Josh Roe (Kansas State University), Richard Sawyer (Farmer Mac), Bruce Sherrick (University of Illinois), Richard Todd (Federal Reserve Bank of Minneapolis), Cal Turvey (Cornell University), Christine Wilson (Purdue University).

Brief Summary of Minutes

Accomplishments

The goal of our research efforts 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 conducted a series of studies addressing the changing structure of the agricultural sector. Several research projects addressed the credit risks faced by agricultural lenders, measured the impacts of various government and risk management programs, and evaluated the economic viability of rural communities (see publication list). The committee also summarized previous research in several major areas of agricultural finance. The accumulated knowledge and the recommendations for future needs and research will be disseminated via a special issue of the Agricultural Finance Review, the leading journal of this committee. <br />

Publications

Impact Statements

1. The group developed several innovative credit risk models to comply with the New Basel Accord regulators. The models can be readily adopted by agricultural lenders to better evaluate the necessary capital to protect against credit losses.
2. The group evaluated the performance of the Loan Programs for the Farm Service Agency and Non-Traditional Financial Institutions. Policy recommendations were made regarding program performance and efficiency.
3. The group evaluated the impact of urban development on land values and evaluated case studies of entrepreneurship.

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Participants

Bruce Ahrendsen (University of Arkansas), Joseph Anderson (Cornell University), Kenneth Auer (Farm Credit Council), Mary Bohman (ERS-USDA), Brian Briggeman (Oklahoma State University), Brian Brinch (Farmer Mac), Faye Butts (Cornell University, Ram Chandran (ERS-USDA), Sommarat (Pin) Chantarat (Cornell University), Joseph Cooper (ERS-USDA) Theodore Covey (ERS-USDA), Matthew Diersen (South Dakota State University), Bruce Dixon (University of Arkansas),Charles Dodson (FSA-USDA), Jonathan Dressler (Penn State University), Ron Durst (ERS-USDA), Paul Ellinger (University of Illinois), Bert Ely (Ely & Company, Inc.), Ken Erickson (ERS-USDA), James Eaves (Rutgers University), Travis Farley (University of Illinois), Allen Featherstone (Kansas State University), Francisco Fraire (Texas A&M University), Steven Guebert (Farm Credit Administration), Michael Gunderson (University of Florida), Cole Gustafson (North Dakota State University), Steven Hanson (Michigan State University), Valentina Hartarska (Auburn University), Gregg Ibendahl (Mississippi State University), Craig Jagger (U.S. House of Representatives), James Johnson (ERS-USDA), Ani Katchova (University of Illinois), Maureen Kilkenny (University of Nevada), Steve Koenig (FSA-USDA), Rong Kong (visiting scholar, Cornell University), Keith Leggett (American Bankers Association), Sergio Lence (Iowa State University), Dana Marcellino (Purdue University), Daniel Milkove (ERS-USDA), Griffen Moag (Cornell University), John Moore (Farm Credit Administration), Mitchell Morehart (ERS-USDA), Charles Moss (University of Florida), Raphael Onyeaghala (Southwest Minnesota State University), Timothy Park (University of Georgia), Gabriel Power (Cornell University), Josh Roe (Kansas State University), Richard Sawyer (Farmer Mac), Jane Schuchardt (CSREES-USDA), Latisha Settlage (University of Arkansas at Fort Smith), Jack Shaw (USDA), Apurba Shee (Cornell University), Bruce Sherrick (University of Illinois), Agapi Somwaru (ERS-USDA), Jeffrey Stokes (Penn State University), Patrick Sullivan (ERS-USDA), Jackson Takach (Farmer Mac), David Torgerson (ERS-USDA), Calum Turvey (Cornell University), James Webster (The Webster Agricultural Letter), Christine Wilson (Purdue University).

Brief Summary of Minutes

Accomplishments

NC-1014 research efforts aim to understand and evaluate recent changes in agricultural and rural finance markets. It also provides recommendations regarding improvements in programs and policies affecting the well-being of farm and rural households. NC-1014 studied the changing agricultural sector structure and evaluated the impacts of various government programs as well as producer responses to changing market conditions. <br /> <br /> Several research projects studied how client financing needs changed because non-traditional players have entered the market and because rural non-farm entrepreneurial activities have become more important. Researchers also focused on understanding how traditional lenders can improve their financial products and adopt new technologies for assessing and managing credit risk and improve financial products in order to remain viable service providers to the agricultural community. <br /> <br /> The committee continued work on summarizing previous research as well as identify directions for future research in several major agricultural finance areas and disseminating the accumulated knowledge and recommendations for future needs and research via a special issue of the Agricultural Finance Review.<br />

Publications

NC1014 Publication list <br /> Oct 05-Sept 06 <br /> <br /> Blank, Steven C.; Erickson, Kenneth W.; Moss, Charles B., 2005. Profit Patterns across American Agriculture, Journal of Agricultural and Resource Economics, 30(2), pp. 205-30.<br /> Diersen, Matthew A.; Sherrick, Bruce J., 2005. Valuation and Efficient Allocation of GSM Export Credit Guarantees; Journal of Agricultural and Resource Economics, 30(1), pp. 151-66.<br /> <br /> Featherstone, Allen M. Roessler, Laura M. Barry, Peter J., 2006. Determining the Probability of Default and Risk-Rating Class for Loans in the Seventh Farm Credit District Portfolio, Review of Agricultural Economics. 28(1) p. 4-23.<br /> <br /> Gloy, Brent A.; Gunderson, Michael A.; LaDue, Eddy L., 2005. The Costs and Returns of Agricultural Credit Delivery, American Journal of Agricultural Economics,87(3), pp. 703-16. <br /> <br /> Gloy, Brent A.; LaDue, Eddy L.; Gunderson, Michael A., 2005. Credit Risk Migration and Downgrades Experienced by Agricultural Lenders, Agricultural Finance Review, 65(1), pp. 1-16.<br /> <br /> Gustafson, Cole, 2005. Rural Small Business Trade Credit: A Paradox, Agricultural Finance Review, 65(1), pp. 45-57.<br /> <br /> Gustafson, Cole R.; Nganje, William E., 2006. Value of Social Capital to Mid-sized Northern Plains Farms; Canadian Journal of Agricultural Economics, 54(3), pp. 421-38.<br /> <br /> Hartarska, Valentina; Gonzalez-Vega, Claudio, 2006. Evidence on the Effect of Credit Counseling on Mortgage Loan Default by Low-Income Households Journal of Housing Economics 15(1), pp. 63-79.<br /> <br /> Huang, Haixiao; Miller, Gay Y.; Sherrick, Bruce J.; Gomez, Miguel I., 2006. Factors Influencing Illinois Farmland Values, American Journal of Agricultural Economics, 88(2), pp. 458-70.<br /> <br /> Huffman, Sonya K.; Kilkenny, Maureen, 2006. Regional Welfare Program and Labor Force Participation, Iowa State University, Department of Economics, Staff General Research Papers.<br /> <br /> Johnson, James P.; Lenartowicz, Tomasz; Apud, Salvador, 2006. Cross-Cultural Competence in International Business: Toward a Definition and a Model, Journal of International Business Studies, 37(4), pp. 525-43.<br /> <br /> Jolly, Robert W.; Roe, Josh D. 2005. Selling a Piece of the Farm Credit System; Choices, 20(1), pp. 19-24.<br /> <br /> Katchova, Ani L.; Sheldon, Ian M.; Miranda, Mario J, 2005. A Dynamic Model of Oligopoly and Oligopsony in the U.S. Potato-Processing Industry, Agribusiness, 21(3), pp. 409-28.<br /> <br /> Katchova, Ani L., 2005. The Farm Diversification Discount, American Journal of Agricultural Economics, 87(4), pp. 984-94.<br /> <br /> Kilkenny, Maureen; Jolly, Robert W., 2005. Are Rural Credit Markets Competitive? Is There Room for Competition in Rural Credit Markets? Choices, 20(1), pp. 25-29.<br /> <br /> Lence, Sergio H.; Hayes, Dermot J. Genetically Modified Crops: Their Market and Welfare Impacts; American Journal of Agricultural Economics, November 2005, v. 87, iss. 4, pp. 931-50<br /> <br /> Lence, Sergio H.; Hayes, Dermot J., 2006, EU and US Regulations for Handling and Transporting Genetically Modified Grains: Are Both Positions Correct? EuroChoices, 5(2), pp. 20-27.<br /> <br /> Lence, Sergio H.; Hayes, Dermot J.; McCunn, Alan; Smith, Stephen; Niebur, William S., 2005. Welfare Impacts of Intellectual Property Protection in the Seed Industry, American Journal of Agricultural Economics, 87(4), pp. 951-68.<br /> <br /> Livanis, Grigorios; Moss, Charles B.; Breneman, Vincent E.; Nehring, Richard F., 2006. Urban Sprawl and Farmland Prices, American Journal of Agricultural Economics, 88 (4), pp. 915-29.<br /> <br /> McBride, William D.; Johnson, James D., 2006. Defining and Characterizing Approaches to Farm Management, Journal of Agricultural and Applied Economics, 38(1), pp. 155-67.<br /> <br /> Mishra, Ashok K.; Lence, Sergio H., 2006. Risk Management by Farmers, Agribusinesses, and Lenders, pp. 26 pages, Iowa State University, Department of Economics, Staff General Research Papers<br /> <br /> Mishra, Ashok K.; Moss, Charles B., 2006. Adapting a Nonparametric Pooling Test for Use in Panel Cointegration Models, Applied Economics Letters, 13(6), pp. 355-57.<br /> <br /> Mishra, Ashok K.; Park, Timothy A., 2005. An Empirical Analysis of Internet Use by U.S. Farmers, Agricultural and Resource Economics Review, 34(2), pp. 253-64.<br /> <br /> Moss, Charles B., 2006. Valuing State-Level Funding for Research: Results for Florida, Journal of Agricultural and Applied Economics, 38(1), pp. 169-83.<br /> <br /> Nadolnyak, Denis A.; Fletcher, Stanley M.; Hartarska, Valentina M., 2006. Southeastern Peanut-Production Cost Efficiency under the Quota System: Implications for the Farm-Level Impacts of the 2002 Farm Act, Journal of Agricultural and Applied Economics, 38(1), pp. 213-24.<br /> <br /> Park, Timothy A.; Lohr, Luanne, 2005. Organic Pest Management Decisions: A Systems Approach to Technology Adoption, Agricultural Economics, 33(3), pp. 467-78.<br /> <br /> Settlage, Latisha, 2005. Examining the Use of Farm Service Agency Guaranteed Loans by Commercial Banks, 2005 Purdue University.<br /> <br /> Siebert, John; Litzenberg, Kerry; Gallagher, Richard; Wilson, Christine; Dooley, Frank; Wysocki, Al., 2006. Factors Associated with Students' Academic Motivation in Agricultural Economics Classes, American Journal of Agricultural Economics, 88(3), pp. 750-62.<br /> <br /> Stokes, Jeffrey R., 2006. Dynamic Cash Discounts When Sales Volume Is Stochastic, Quarterly Review of Economics and Finance, 45(1), pp. 144-60.<br /> <br /> Tavernier, Edmund M.; Turvey, Calum G., 2006. Determinants of a Social Clause in International Trade Negotiations, Agricultural Economics, 34(1), pp. 51-57.<br /> <br /> Turvey, Calum G.; Komar, Sridar, 2006. Martingale Restrictions and the Implied Market Price of Risk, Canadian Journal of Agricultural Economics, 54(3), pp. 379-99.<br /> <br /> Turvey, Calum G.; Weersink, Alfons; Chiang, Szu-Hsuan Celia, 2006. Pricing Weather Insurance with a Random Strike Price: The Ontario Ice-Wine Harvest, American Journal of Agricultural Economics, 88(3), pp. 696-709.<br /> <br /> Wilson, Christine; Featherson, Allen; Kastens, Terry; Jones, John, 2006. Determining What's Really Important to Lenders: Factors Affecting the Agricultural Loan Decision-Making Process, pp. 71 pages, Purdue University, College of Agriculture, Department of Agricultural Economics, Working Papers: 06-07.<br /> <br /> Wilson, Christine; Featherstone, Allen, 2006. Adjusting the CAPM for Threshold Effects: An Application to Food and Agribusiness Stocks, pp. 31 pages, Purdue University, College of Agriculture, Department of Agricultural Economics, Working Papers: 06-08.<br />

Impact Statements

1. NC-1014 research helps improve the design of FSA programs using evaluation of USDA Farm Loan Program aspects including cost effectiveness and lender participation in FSAs direct and guaranteed loan programs as well as the use of FSA commercial bank interest assistance.
2. Researchers evaluated the current state of farm record-Provide recommendations for better estimation of farm household after-tax income.
3. Proposed methodology that could incorporate the extent of agricultural borrower market segmentation and factors affecting agricultural mortgage terminations in new loan products.
4. Explored interaction between lender characteristics and loan contracts and farmer demand for certain lender attributes, the role of special financial product aspects and loan default
5. Identified premium subsidy changes that may affect the crop insurance demand.

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Participants

Ahrendsen, Bruce (ahrend@uark.edu) - University of Arkansas; Baccus, Bruce (bbaccus@raboag.com) - Rabo AgriFinance; Briggeman, Brian (brian.briggeman@okstate.edu) - Oklahoma State University; Dixon, Bruce (bdixon@uark.edu) - University of Arkansas; Dodson, Charles (cdodson@ers.usda.gov) - U.S. Department of Agriculture; Ellinger, Paul (pellinge@uiuc.edu) - University of Illinois; Escalante, Cesar (cescalante@agecon.uga.edu) - University of Georgia; Estrada, Dairo () - Central Bank of Colombia; Featherstone, Allen (afeather@ksu.edu) - Kansas State University; Garrett, Tom (tom.a.garrett@stls.frb.org) - Federal Reserve Bank  St. Louis; Gloy, Brent (bg49@cornell.edu) - Cornell University; Gomez, Miguel (migomez@uiuc.edu) - University of Illinois; Gunderson, Mike (mag79@ufl.edu) - University of Florida; Gustafson, Cole (Cole.Gustafson@ndsu.edu) - North Dakota State University; Hanson, Steve (hansons@anr.msu.edu) - Michigan State University; Hartarska, Valentina (hartavm@auburn.edu) - Auburn University; He, Lin () - ; Henderson, Jason (jason.henderson@kc.frb.org) - Federal Reserve Bank of Kansas City; Henderson, Rick (Rick.henderson@raboag.com) - Rabo AgriFinance; Hollis, Rich (Rich.hollis@raboag.com) - Rabo AgriFinance; Janssen, Larry (larry.janssen@sdstate.edu) - South Dakota State University; Katchova, Ani (katchova@uiuc.edu) - University of Illinois; Kilkenny, Maureen (kilkenny@unr.edu) - University of Nevada; Lence, Sergio (shlence@iastate.edu) - Iowa State University; Moore, John (moorej@fca.gov) - Farm Credit Administration; Moss, Charles (cbmoss@ifas.ufl.edu) - University of Florida; Onyeaghala, Raphael (Onyeagha@southwestmsu.edu) - Southwest Minnesota State University; Paulson, Nick (npaulson@uiuc.edu) - University of Illinois; Pei, Guo () - ; Schuchardt, Jane (jschuchardt@csrees.usda.gov) - CSREES; Sherrick, Bruce (sherrick@uiuc.edu) - University of Illinois; Stadlman, Neil (Neil.stadlman@raboag.com) - Rabo AgriFinance; Stokes, Jeff (jstokes@psu.edu) - Pennsylvania State University; Trujillo, Andres (atrujil3@uiuc.edu) - University of Illinois; Tsoodle, Leah (ltsoodle@agecon.ksu.edu) - Kansas State University; Turvey, Cal (cgt6@cornell.edu) - Cornell University; Wu, Jingtao (jingtao@iastate.edu) - Iowa State University; Zohrabyan, Tatevik (tzohboryan@ag.tamu.edu) - Texas A&M University

Brief Summary of Minutes

The 2007 Annual Meeting of NC-1014 was held October 4 and 5 at the Headquarters of Rabo AgriFinance in Creve Coeur, Missouri. Secretary Gunderson called to the meeting to order at 8:17 a.m. on October 4. He welcomed the participants and briefly commented on the agenda and procedures for the two days. Rick Henderson, Chief Executive Officer of Rabo AgriFinance also welcomed the group on behalf of the hosts. Rick and Bruce Baccus, Deputy CEO, provided an overview of the operations and missions of Rabo AgriFinance, Rabobank N.A., and Rabobank International.

The participants spent the rest of the morning in two sessions of selected papers. The papers presented in these sections addressed the objectives of NC1014 and were the products of the work of NC1014 members. A total of 6 papers were presented during the two sessions. The specific topics covered by these papers and discussions included:

Factors Influencing Farmer Financing Choices
U.S. Farm Households Operating a Non-farm Business: A Tobit Analysis
An Empirical Investigation of Farm Loan Determinants
Investigating Gender Bias in Farm Service Agencys Lending Decisions

Managing Risk in the Farm Portfolio
Financial Management and Portfolio Analysis for U.S. Farm and Nonfarm Households
An Economic Evaluation of Forecasts of Relevance to Agribusinesses and Agricultural Lenders
Eliminating Price Risk to Expand Capacity for Value-Added Activities

Members enjoyed a boxed lunch, compliments of Rabo AgriFinance. Members then heard from Dairo Estrada, Director of Financial Stability, Central Bank of Colombia. The afternoon also had two paper sessions including the following topics:

Factors Influencing Rural Asset Values
The Impact of Ethanol Plants on Land Values in the Great Plains
Cointegration Analysis of Regional House Prices in U.S.

Investigating Government Sponsored Loan Programs Outcomes
An Analysis of Borrowing Rates on FSA Guaranteed Farm Loans
Competing Risk Proportional Hazard Models of Farm Service Agency Direct Operating Loans
Borrower Term Limits on FSA Loans

During the rest of the afternoon, the group held its business meeting. During the meeting, the group reviewed its project objectives, planned and assessed the work on each objective, began preparations for the 2008 meeting, and nominated and elected new officers.
Remarks from Calum Turvey, Editor of Agricultural Finance Review
" AFR is negotiating with Blackwell for publication rights
" This move should elevate the status of AFR
" Many citations of AFR around the world in agricultural finance make it attractive
" Assistant Editor Bruce Sherrick is in favor of the agreement
" International edition was successful and drew many submissions
" Editor and committee is working on selecting Best Paper and Best Paper with Graduate Student Awards
" Biographies have been included in the recent editions and will continue to honor some of the agricultural finance pioneers.

Remarks from Steven Hanson, Administrative Advisor of NC-1014
" It was noted the strong collaboration and output historically seen in the past
" It was noted that the biggest weakness was evidence of grantsmanship in the group
" The group is up for its midterm review and will need to renew the project in December 2008
" Steve lends strong support to renewal given the historic success of the group

Remarks from Jane Schuchardt, CSREES Representative for NC-1014
" There will be two reports mailed to the group
" There are two categories specifically for social scientists in the NRI Grants  Rural Development and Small and Medium Sized Farm Prosperity  both are relevant to the group
" You should know your CSREES National Program Leader liaison to your state (www.csrees.usda.gov/business/other_links/npl_liaisons.pdf), so that you can find out how to report research outcomes.
" Consider requesting a review of your program, department, or college. The call went out to land-grant university administrators from CSREES on October 2, 2007.Department reviews in fall of 2007 and 2008 include University of New Mexico, University of Wisconsin, University of Arizona, and University of Nevada-Reno.
" Join consumer economists to propose a joint session at the AAEA and American Council on Consumer Interests (ACCI) meeting July 24-29, 2008 in Orlando, FL. The call on the ACCI web site is at http://www.consumerinterests.org/files/public/CallForPresentationsAM08.pdf.

2008 Location
Charles Moss moved that the 2008 Annual Meeting be held in Kansas City at the Federal Reserve Bank in conjunction with the National Agricultural Credit Council with specific dates left to the discretion of Jason Henderson. Brian Briggeman seconded the motion.
The motion was unanimously supported.

2008 Officers
Charles Moss presented a slate of candidates for the executive board that included Valentina Hartarska, Chair; Michael Gunderson, Vice-Chair; and Brian Briggeman, Secretary.
Charles Moss moved to accept the slate of candidates. Paul Ellinger seconded the motion.
The motion was unanimously supported.

2008 AAEA Meetings
Charles Moss moved that a planning meeting be held the Sunday before the AAEA meetings in Orlando, Florida. Allen Featherstone seconded the motion.
The motion was unanimously supported.
Vice-chair Gunderson volunteered to contact AAEA regarding a room.
Charles Moss volunteered to draft a principal paper session for the AAEA meetings that would serve as a forum to contemplate the future of agri-finance. The main issues suggested included, but were not limited to: (1) rural asset values and capital flows; (2) loan and financing contracts; and (3) international agri-finance issues.

NC-1014 Project Renewal
Given that the group must apply to be renewed by December 2008, the next year will need to involve a process of preparing the application document.
Brian Briggeman and Michael Gunderson volunteered to serve as co-chairs of the drafting committee with committee members including Valentina Hartarska, Brent Gloy, Cole Gustafson, and Allen Featherstone.
The committee will solicit evaluate the previous proposal, solicit ideas for the new proposal, and put together a draft for the meeting prior to the 2008 AAEA Annual Meeting.

The group recessed and took at group tour of the Anheuser-Busch Brewery.

The second day of the meeting began with two paper sessions covering the following topics:

Agribusiness Lending Internationally
Credit Risk Evaluation for Loans of Banco Agrario in Colombia
Commodity Linked Credit: A Risk Management Instrument for the Agrarians in India

Investigating the Macro Agricultural Economy
The Effect of Diversification on Agricultural Returns and Volatility: An Information Approach
Rural Growth and the Rural Capital Account
State-Level Evidence of the Boom/Bust Cycle for Farmland

The group adjourned at noon.

Accomplishments

Escalante, C.L.. Cash Rents Paid for Georgia Farmland in 2007. Department of Agricultural and Applied Economics. AGECON 07-05 (2007).<br /> <br /> Escalante, C.L.. Georgia Farmland Values in 2007. Department of Agricultural and Applied Economics. AGECON 07-06 (2007).<br /> <br /> Wolfe, K., C.L. Escalante, G. Burtle, and A. Flanders. Boston Fish Farm Feasibility Study. Center for Agribusiness and Economic Development, University of Georgia, (2007).<br /> <br /> Barnett, B., J. Bergstrom, C.L. Escalante, E. G. Fonsah, W. Harris, S. Kane, C. Lacy, J. McKissick, T. Shepherd, G. Shumaker, D. Shurley, F. Stegelin, N. Smith, K. Wolfe, and A. Ziehl Georgia Ag Forecast 2007. Department of Agricultural and Applied Economics. 2007.<br /> <br /> Wolfe, K., C. L. Escalante, and J. McKissick. Market Analysis of Traditional, Grass-Fed and Organic Milk in Selected Markets. Center for Agribusiness and Economic Development, University of Georgia, CR-06-09 (2006).<br /> <br /> Wolfe, K. and C. L. Escalante. Business Plan for Oconee River Produce, Inc. Center for Agribusiness and Economic Development, University of Georgia, 2006.<br /> <br /> McKissick, J., C.L. Escalante, A. Flanders, and K. Wolfe. The Economic Feasibility of a Large Scale Pork Processing Plant in Cuthbert, Georgia Area. Center for Agribusiness and Economic Development, University of Georgia, FR-06-01 (2006).<br /> <br /> Wolfe, K. and C. L. Escalante. Marketing and Financial Feasibility of Establishing a Bottled Water Facility. Center for Agribusiness and Economic Development, University of Georgia, 2006.<br /> <br /> Escalante, C.L. Immigration Policy Overview. in The Georgia Economic Issues Newsletter, C. L. Escalante, ed., 22,3 (2006): 1-2.<br /> <br /> Escalante, C.L. Farm Financial Inputs Outlook. in The Georgia Economic Issues Newsletter, C. L. Escalante, ed., 22,2 (2006): 3-4.<br /> <br /> Agricultural and Rural Finance Markets in Transition. Proceedings of the Regional Research Committee NC-1014. A.L. Katchova, ed. Department of Agricultural and Consumer Economics, University of Illinois, 2006.<br /> <br /> Dixon, Bruce L., Bruce L. Ahrendsen, Monica Foianini, Sandy Hamm, and Diana Danforth. Competing Risk Duration Models of Farm Service Agency Direct Loans. In Hawaii International Conference on Business 2007 Conference Proceedings, http://www.hicbusiness.org (May 24-27, 2007):776-778.<br /> <br /> Ahrendsen, Bruce L., Bruce L. Dixon, Chris Bacchus, and Latisha A. Settlage. Commercial Bank Usage of the Farm Service Agency Interest Assistance Program. Presented at Regional Research Committee NC-1014, Washington D.C., October 2-3, 2006. In Agricultural and Rural Finance Markets in Transition. ed. Ani L. Katchova, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, http://www.ace.uiuc.edu/agfin/proceedings/AgFin2006.pdf (December 2006):40-61.<br /> <br /> Settlage, Latisha, Bruce Dixon, Bruce Ahrendsen, and Steve Koenig. A Detailed Look at Lender Participation in the Farm Service Agency Guaranteed Loan Program. Presented at Regional Research Committee NC-1014, Washington D.C., October 2-3, 2006. In Agricultural and Rural Finance Markets in Transition. ed. Ani L. Katchova, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, http://www.ace.uiuc.edu/agfin/proceedings/AgFin2006.pdf (December 2006):23-39.<br /> <br /> Dixon, Bruce L., Bruce L. Ahrendsen, and Monica A. Foianini. "Macroeconomic Impacts on Agriculture. Farm Management and Marketing Newsletter. University of Arkansas, Division of Agriculture. 15,1(March 2007):1-5.<br /> <br /> Briggeman, Brian C. and Philip Kenkel, Farm Credit Employees Perceptions of Loan Business Relative to Different Types of Borrowers, abstract to be published in Journal of Agricultural and Applied Economics, 2007<br /> <br /> Briggeman, Brian C. and Danny Klinefelter, Events May Trigger Better Times, The Farmer-Stockman, January 2007, page 40<br /> <br /> Hartarska V., and Chi Mai, (2007) Does off-farm income influence investment in family farms? Selected Poster presented at the Annual Meetings of the American Agricultural Economists Association, Portland, OR, July 29-August 1, 2007.<br />

Publications

Katchova, A.L., M.J. Miranda, and C. Gonzalez-Vega. A Dynamic Model of Individual and Group Lending in Developing Countries. Agricultural Finance Review 66(2006):251-267.<br /> <br /> Hennings, E., and A.L. Katchova. Growth Strategies of Farm Businesses: A Quantile Regression Approach. The Journal of American Academy of Business 12(2007): in press.<br /> <br /> Friedrichsen, M., W. Nganje, Greg McKee, and C. Gustafson. Marginal Impact of Sales Consultant Visits and Financing Opportunities on the Adoption of Variable Rate Fertilizer Application. Agricultural Finance Review, Fall 2007, Forthcoming. <br /> <br /> Gustafson, C. and W. Nganje. Value of Social Capital to Mid-Sized Northern Plains Farms Canadian Journal of Agricultural Economics, 54(2006):421-38. <br /> <br /> Gustafson, C., W. Wilson, and B. Dahl. Malt Barley Risk Management Strategies Western Economics Forum, 5,2(Fall 2006):15-22. <br /> <br /> Nganje, W., R. Hearne, and C. Gustafson. Farmers Preferences for Alternative Crop and Health Insurance Subsidies Review of Agricultural Economics, Forthcoming. <br /> <br /> Boumtje, P.I., W. Florkowski, G. Landry, and C.L. Escalante. Determinants of Profitability Under Different Golf Business Ownership Structures: The Case of Golf Courses in Georgia. Southwestern Economic Review, forthcoming, Spring 2008.<br /> <br /> Rejesus, R. M., B.J. Sherrick, G.D. Schnitkey, and C.L. Escalante. Factors Influencing Producers Perceptions about the Importance of Government Support Programs in Agriculture: Application of a Semi-Parametric Ordered Response Model. Applied Economics, forthcoming, 2008.<br /> <br /> Byrd, M. M., C.L. Escalante, E.G. Fonsah, and M.E. Wetzstein. Feasible Fumigant-Herbicide System Alternatives to Methyl Bromide for Bell Pepper Producers. Journal of Agribusiness 25,1 (2007) 31-46.<br /> <br /> Deng, X., C.L. Escalante, P.J. Barry, and Y. Yu. Markov Chain Models for Farm Credit Risk Migration Analysis. Agricultural Finance Review 67,1(Spring 2007): 99-117.<br /> <br /> Escalante, C.L. and C. G. Turvey. Business Start-Up Survival Challenges and Strategies of Agribusiness and Non-agribusiness Entrepreneurs. Agricultural Finance Review 66,1 (Spring 2006) 61-75.<br /> <br /> Byrd, M.M., C. L. Escalante, E.G. Fonsah, and M.E. Wetzstein. Financial Efficiency of Methyl Bromide Alternatives for Georgias Bell Pepper Industries. Journal of the American Society of Farm Managers and Rural Appraisers 69,1 (2006) :31-39.<br /> <br /> Escalante, C. L., R. Brooks, J. E. Epperson, and F. E. Stegelin. Credit Risk Assessment and Racial Minority Lending at the Farm Service Agency. Journal of Agricultural and Applied Economics,38,1 (2006): 61-75.<br /> <br /> Enahoro, D.K. and B.A. Gloy. Examining the Benefits of Federally Subsidized Farm Savings Accounts for Dairy Farmers. Paper presented at the 2006 Annual Meetings of the American Agricultural Economics Association, Long Beach, CA, July 25, 2006.<br /> <br /> Hyde, J. and B.A. Gloy. "Dynamic strategic responses among advertisers: the case of meat products." Economics Bulletin, 13:3(2007):1-14.<br /> <br /> Stokes, J.R. and B.A. Gloy. Mortgage Delinquency Migration: An Application of Maximum Entropy Econometrics. Journal of Real Estate Portfolio Management, 13:2(2007):153-160. <br /> <br /> Stokes, J.R. and B.A. Gloy. Delinquency and Default on Agricultural Mortgages. Agricultural Finance Review, 67:1(2007):75-85.<br /> <br /> Gunderson, M. A., B.A. Gloy, and E.L. LaDue. Accounting for Loan Size and Credit Rating when Calculating Lifetime Value of Agricultural Lending Relationships. Agricultural Finance Review, 66:1(2006):109-123. <br /> <br /> Nwoha, John O., Bruce L. Ahrendsen, Bruce L. Dixon, Daniel M. Settlage, and Eddie C. Chavez. FSA Direct Loan Targeting: Successful and Financially Necessary? Agricultural Finance Review 67,1(Spring 2007):35-53. <br /> <br /> Briggeman, Brian C., Shida R. Henneberry, and F. Bailey Norwood, How Do Employers Assess Job Candidate Attributes?, NACTA Journal, September 2007, Forthcoming<br /> <br /> Briggeman, Brian C., Allan W. Gray, Mitchell J. Morehart, Timothy G. Baker, and Christine A. Wilson, A New U.S. Farm Household Typology: Implications for Agricultural Policy, Review of Agricultural Economics, 2007, 29(4): 765, Forthcoming<br /> <br /> Briggeman, Brian C., Allan W. Gray, and Joshua D. Detre, Using Limited Information to Support the Decision to Launch a New Product in the Fruit Juice Market: A Teaching Case Study, Review of Agricultural Economics, 2008, Forthcoming<br /> <br /> Hartarska V. and D. Nadolnyak (2007), Do Regulated Microfinance Institutions Achieve Better Sustainability and Outreach? Cross-Country Evidence, Applied Economics 39(10-12):1207-1222.<br /> <br /> Hartarska V. and M. Holtmann (2006), An Overview of Recent Developments in the Microfinance Literature, Agricultural Finance Review, 66(2): 147-165.<br /> <br /> Hartarska V. and C. Gonzalez-Vega (2006), Evidence on the Effect of Credit Counseling and Mortgage Loan Default by Low-Income Households, Journal of Housing Economics, 15 (1): 63-79.<br /> <br /> Featherstone, A.M. and M..W. Woolverton. Biofuels Production in the United States. New Zealand Journal of Primary Industry Management. September 2007.<br /> <br /> Pendell, D.L. and A.M. Featherstone. Structural Breaks and Agricultural Asset Allocation. Agricultural Finance Review, Forthcoming.<br /> <br /> Zaher, Mohammad and A.M. Featherstone. Productive Efficiency in the Middle East and North America. Applied Economics, forthcoming.<br /> <br /> Christev, Atanas and A.M. Featherstone. A Note on Allen Uzawa Partial Elasticities of Substitution: The Case of the Translog Cost Function. Applied Economics Letters, forthcoming. <br /> <br /> Serra, T., D. Zilberman, J.M. Gil, and A.M. Featherstone. The Effects of Decoupling on Land Allocation. Applied Economics, Forthcoming. <br /> <br /> Featherstone, A.M., C.A. Wilson, T.L. Kastens, and J.D. Jones. Factors Affecting the Agricultural Loan Decision-Making Process. Agricultural Finance Review, 67(Spring 2007):13-33.<br /> <br /> Abaru, B.M., A.W. Mugera, D.W. Norman, and A.M. Featherstone. The Uganda Rural Farmers Scheme: Womens Accessibility to Agricultural Credit. Agricultural Finance Review, 66(Fall 2006):215-34.<br /> <br /> Hyde, J. and B.A. Gloy. "Dynamic strategic responses among advertisers: the case of meat products." Economics Bulletin, 13:3(2007):1-14.<br /> <br /> Stokes, J.R. and B.A. Gloy. Mortgage Delinquency Migration: An Application of Maximum Entropy Econometrics. Journal of Real Estate Portfolio Management, 13:2(2007):153-160. <br /> <br /> Stokes, J.R. and B.A. Gloy. Delinquency and Default on Agricultural Mortgages. Agricultural Finance Review, 67:1(2007):75-85. <br />

Impact Statements

1. Canola-based Epoxy Resins for Bio-based Plastic Composites National Canola Research Program, $81,450, Co-PI: Cole Gustafson, 33%, 2006.
2. Malt Barley Risk Management Education, Billings Region USDA/RMA, $10,000, PI: Cole Gustafson, 100%, 2006.
3. Synergy of Using Peas as Ethanol Feedstock APUC, $42,420, Co-PI: Cole Gustafson, 33%, 2006.
4. Williston Corn Feasibility Study Williston Econ. Dev. Part., $5,650, PI: Cole Gustafson, 100%, 2006.
5. Labor Input Substitution Decisions and Business Sustainability Strategies under Changing Farm Labor Market Conditions: Comparative Economic Viability Analyses of Organic and Conventional Farming Systems. Southern Sustainable Agriculture Research and Education (SARE). $120,000, PI: Cesar Escalante.
6. Farmdoc  An Outreach Alternative for Agricultural Resource Management Survey Data. Economic Research Service, USDA, $31,935, PI: P.N. Ellinger, Co-PIs: S. Irwin, A.L. Katchova, D. Good, and G. Schnitkey. 2006-2007.
7. Non-Farm Business Income, funded through the Farm Credit Administration, 9/29/06 to 6/20/07, for $24,855. Project PI: Brian C. Briggeman
8. Farm Household Decision-Making Behavior, funded through the Economic Research Service of the United States Department of Agriculture, 10/5/06 to 9/30/09, for $10,000. Project PI: Brian C. Briggeman
9. Pilot Project to Study a Data Enclave for ARMS, funded through the Economic Research Service of the United States Department of Agriculture, 8/21/07 to 9/30/09, for $15,000. Project PI: Brian C. Briggeman
10. Consumer Preferences for Fairness and Distribution of Outcomes across the Agricultural Supply Chain and within the Farm Sector, funded through the National Research Initiative Competitive Grants Program, received confirmation of acceptance on 9/26/07. Project PIs: Jayson L. Lusk and Brian C. Briggeman
11. Agricultural Finance Markets in Transition, duration October 2006-September, 2007; funded in the amount of $20,810 Principal Investigator: Valentina Hartarska.
12. Forestry and Community: Creating Local Markets for Local Resources, National Research Initiative Small Farms Grant Enhancing the Prosperity of Small Farms & Rural Agricultural Communities, interdisciplinary project with duration June 2005 - July 2008; $450,000 PI: C. Bailey, Co-PIs: Valentina Hartarska , M. Dubois, S. Lindsey.
13. Global Awareness of the International Dimensions of Agriculture. USDA-CSREES International Science and Education, Amount $99,917, April 1, 2006 - August 31, 2008 PI: Allen Featherstone.
14. Members of the group assessed the factors that influence financing choices among agricultural producers. In particular, researchers found that female borrowers are more likely to submit successful applications to the Farm Service Agency.
15. Members of the group identified opportunities for financial improvement among producers by eliminating risk in their operations. Specifically, researchers evaluated the usefulness of economic forecasts in decision making and the impact of reducing business risk on the financial-risk bearing capacity of a firm.
16. Members of the group identified the impact of ethanol plants and the rise in housing prices on rural land values.
17. Members of the group identified the role of government policies in providing low-cost credit to rural businesses. In particular, it was found that the term limits imposed by the FSA have little impact because producers are typically graduating from the program on time.
18. Members of the group identified the impacts capital moving from rual areas to urban areas. In particular, evidence showed that rural growth would benefit from an inflow of capital.

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Report Information

Participants

Featherstone, Allen (afeather@ksu.edu) - Kansas State University;
Gloy, Brent (bg49@cornell.edu) - Cornell University;
Briggeman, Brian (brian.briggeman@okstate.edu) - Oklahoma State University;
Ahrendsen, Bruce (ahrend@uark.edu) - University of Arkansas;
Sherrick, Bruce (sherrick@uiuc.edu) - University of Illinois;
Turvey, Calum (cgt6@cornell.edu) - Cornell University;
Dodson, Charles (cdodson@ers.usda.gov) - USDA Economic Research Service;
Wilson, Christine (cwilson1@ksu.edu) - Kansas State University;
Gustafson, Cole (Cole.Gustafson@ndsu.edu) - North Dakota State University;
Micheels, Eric (micheels@illinois.edu) - University of Illinois;
Kropp, Jaclyn (jdk28@cornell.edu) - Clemson University;
Henderson, Jason (jason.henderson@kc.frb.org) - Federal Reserve Bank-Omaha Branch;
Xu, Jin (jxu@tamu.edu) - Texas A&M University;
Detre, Joshua (jdetre@agcenter.lsu.edu) - Louisiana State University;
Janssen, Larry (larry.janssen@sdstate.edu) - South Dakota State University;
Akers, Maria (maria.akers@kc.frb.org) - Federal Reserve Bank-Omaha Branch;
Diersen, Matthew (matthew.diersen@sdstate.edu) - South Dakota State University;
Gunderson, Michael (mag79@ufl.edu) - University of Florida;
Ellinger, Paul (pellinger@illinois.edu) - University of Illinois;
Larsen, Ryan (ralarsen@ag.tamu.edu) - Texas A&M University;
Gondwe, Sera () - Auburn University;
Lence, Sergio (shlence@iastate.edu) - Iowa State University;
Hanson, Steven (hansons@msu.edu) - Michigan State University;
Koenig, Steven (Steven.Koenig@wdc.usda.gov) - USDA;
Osborne, Troy () - FDIC;
Mark, Tyler (tmark1@lsu.edu) - Louisiana State University;
Hartarska, Valentina (hartavm@auburn.edu) - Auburn University;
Guan, Zhengfei (guanz@msu.edu) - Michigan State University

Brief Summary of Minutes

The annual 2008 meeting of the NC-1014 Ag Markets in Transition group was called to order at 8 am on Thursday, September 25th. The meetings were held at the Federal Reserve Bank of Kansas City in Kansas City, MO. Attached is the agenda of presented papers and discussions.

Much of the group discussion focused on the upcoming NC-1014 renewal. Below summarizes this discussion relative to objectives of the renewal project.

Objective 1: Examine the impact of recent fluctuations in capital and commodity markets on the performance, management, and regulation of agricultural financial institutions.

Discussion

- Review of how the financial crisis has impacted agriculture. Cole and Jason have an ASSA principal paper&take it further&more detail on specific impact on ag banks

- Fed regulators

- Survey of underwriting across multistate&FCA has survey in place&Bruce A. is considering this

- Credit fluctuations and impact towards young, beginning, and small farmers, ag banks, grain elevators, etc.

- FSA

- Commodity types differ across regions so impact on regulators

- Call reports and farm credit data

Objective 2: Evaluate the management strategies, capital needs, and policy impacting the financial performance and long-term sustainability of firms in the food and agribusiness sector.

Objective 3: Identify financial institutions and services that benefit agricultural producers and rural communities and expand agricultural markets, especially those producers that are beginning, young, from socially disadvantaged groups, and/or involved in producing specialty crops.

Discussion

- Global supply chains and impact on ag finance

- Lending relationship

- Informal markets

- Experimental economics&discount rates&time preferences&loans

- Development of captive financing and vendor financing

- YBS, socially disadvantage people, etc.

Objective 4: Investigate capital structure, financial performance, and investment strategies of firms producing renewable energy in context of long term climate change. Implications of these findings for agriculture and rural communities will be delineated.

Discussion

- Finance growth

- Spillover effects and bubble effect

- Survey of different states

- Pool knowledge of information across different states

- Potential for dynamics

A short business meeting concluded the annual meeting where Paul Ellinger nominated Brent Gloy to serve as secretary for NC-1014 next year. This nomination was seconded and approved unanimously. Brian Briggeman will coordinate next years NC-1014 meeting, which will be held either late September or early October in New York City. Finally, the renewal writing team consists of Michael Gunderson, Brian Briggeman, and Brent Gloy.

Meeting was adjourned at 12 pm on Friday, September 26th.

Accomplishments

NC-1014 has had four objectives for the last five years:<br /> <br /> 1. Determine the effects of changes in international competitive balance and federal and state policies affecting agriculture on the financial and economic performance of farms, agribusinesses and rural financial markets;<br /> <br /> 2. 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;<br /> <br /> 3. Evaluate the management strategies, capital needs, and financial performance required for the long-term sustainability of firms in the food and agribusiness sector;<br /> <br /> 4. Social Capital and Rural Entrepreneurship.<br /> <br /> <br /> The project produced a great deal of knowledge regarding the various objectives related to financing agriculture and rural America. Project members addressed the objectives through a variety of collaborations. Much of the research addressed individual objectives. Collectively the group has generated more than 100 peer-reviewed publications during the five years of the NC-1014 project. It has also sought and secured additional funding of research. <br /> <br /> <br /> Objective 1<br /> <br /> <br /> With regard to the first objective, the members of NC-1014 have completed analysis related to several national and international policies that impact world agricultural competitiveness. Domestic issues included market structure, patents in agribusiness, and crop and revenue insurance programs among others. International issues included the performance of food and agriculture markets abroad as well as the impact of domestic agricultural subsidies on trade negotiations. <br /> <br /> <br /> With regard to agribusiness competitiveness, market structure was evaluated for several subsectors of the food and agriculture industries. For example researchers found evidence that the behavior of potato-processing firms is much closer to price taking than to collusion. The researchers also noted that price distortions due to oligopsony in the purchase of potatoes are smaller than oligopoly price distortions in either the potato chips or the frozen French fries sectors. <br /> <br /> <br /> Another important investigation of market structure was with regard to the segmentation of corn based on the need for non-genetically-modified grains to meet European demand. The discovery of StarLink corn in U.S. food products caused considerable disruption in corn markets in 2000 and 2001. Segregation costs were incurred by the U.S. grain-handling system in order to ensure that domestic and export sales of food corn and export sales of non-food corn to Japan meet stringent tolerance levels. These costs reduced the revenue that U.S. corn producers would have received in the absence of StarLink. Researchers estimated that revenue loss at between $26 and $288 million. <br /> <br /> <br /> Researchers also found evidence that optimal intellectual property protection is greater than intellectual property protection in the U.S. seed corn market, but lower than the intellectual property protection that could be attained with genetic use restriction technologies. Optimal intellectual property protection is much higher than intellectual property protection achieved under open-pollinated crops or where legal intellectual property protection is limited.<br /> <br /> <br /> Given that the federal government has shown interest in encouraging participation in crop insurance, many members have evaluated these programs. One project found that simpler internal business structures and more dominant farmertenant leasing position can increase the probability of submitting a prevented planting claim. Another project found evidence that, depending on farmer risk aversion, federal risk management programs can either decrease optimal fertilizer application rates. Another study considered holistic health insurance as an alternative. The results indicated that farmers prefer higher levels of coverage and are price sensitive. A sample of farmers did not prefer the subsidy switch. However, the subsidy switch is preferred by older farmers, those with higher health care spending, and farmers who have experienced major health problems.<br /> <br /> <br /> Several important issues regarding international competitiveness were considered. Evaluation of some international agricultural market structures was undertaken. Researchers used data from case studies, interviews, and surveys are used to explore the emergence, growth, and likely consequences of new agricultural operators (NAOs) in Russia. The case studies suggested that entry motives and patterns vary widely, but most NAOs are responding to real profit opportunities. Another case study of Telesignos, a fruit producer and exporter in Guayaquil, Ecuador considered the vertical integration opportunities with an American firm to deliver fresh cut pineapple. <br /> <br /> <br /> Several other projects considered specific agriculture programs. Members found that the governments allocation of country-guarantees is risk-inefficient, and make recommendations for allocations based on the size of the program. Members also found that the peanut quota in the 2002 Farm Act had small impacts on inefficiency likely because of limitations in the transferability of the quota to more productive areas. <br /> <br /> <br /> Objective 2<br /> <br /> The financial strength and performance of agricultural lenders is important in ensuring a healthy rural credit market. The efficient performance of commercial banks, the associations of the farm credit system, and federal government loan programs has always been of interest to the NC-1014 membership. In the recent years researchers have evaluated the implementation of the New Basel Accord in agriculture, the profitability of lending relationships, the default probability of agricultural borrowers, and the performance of international lending institutions. <br /> <br /> <br /> The results show that the necessary capital for agricultural lenders under the New Basel Accord varies substantially depending on the riskiness of the portfolio, which is not surprising. Grouping borrowers together based on their riskiness, however, can improve the lenders understanding of how much capital is necessary. Such successful practices typically permeate a financial system with modifications to fit institutional size and resource base. Vendors offering fee-based capital services, further consolidations among financial institutions, data sharing arrangements, and experience gained by the industry and its regulators will hasten the permeation process and enable community banksas well as the internationally active onesto utilize internal ratings-based approaches and economic capital concepts in their risk management.<br /> <br /> <br /> In order to improve the ability of agricultural lenders to implement many of the New Basel Accord guidelines, a better understanding of the agricultural lending relationships is needed. In particular lenders need greater detail on the default risk of borrowers, loss when default occurs, and in general the profitability of agricultural lending relationships. Many lenders have defaults infrequently, making the assignment of default probabilities and incidences difficult. Greater access to computing technology has helped to overcome this hurdle, but has not eliminated it. <br /> <br /> <br /> Researchers have identified several datasets that can help in aggregating the default occurrences among many borrowers. Furthermore, members also proposed methodology that could incorporate the extent of agricultural borrower market segmentation and factors affecting agricultural mortgage terminations in new loan products. It is likely that this has resulted in improved understanding of defaults in rural and agricultural lending. Researchers found credit scores are often not the best predictors of default risk and that agricultural lenders will need to consider character, capacity, and collateral in the lending decision. Furthermore, researchers found evidence of size economies in agricultural lending, though only to a certain point. As loan relationships became very large, the concentration of risk may have begun to outweigh the benefits of size. <br /> <br /> <br /> An interesting event occurred in the agricultural credit markets during the life of the NC-1014 project. Rabobank International, a privately-held commercial bank, offered to buy one of the largest Farm Credit Associations. Members evaluated this proposed buy-out as well as raised some issues that became apparent as a result of the offer; not least of which was the need for government intervention to improve competitiveness of the rural market in an era of modern communications technology. The Farm Credit System is government sponsored enterprise operating in a manner similar to Fannie Mae and Freddie Mac before their buyouts. In addition, The Farm Service Agency (FSA) direct farm loan program provides credit to family-sized farms including those operated by beginning farmers and socially disadvantaged applicants. Approximately 37% of all U.S. farms are estimated to be eligible for FSA direct loans when farm size, credit needs, farming experience, and occupation are taken into account. Despite the efforts of the government, researchers identified room for more of both farm and nonfarm lending in the rural Midwest. <br /> <br /> <br /> NC-1014 research helps improve the design of FSA programs using evaluation of USDA Farm Loan Program aspects including cost effectiveness and lender participation in FSAs direct and guaranteed loan programs as well as the use of FSA commercial bank interest assistance. The group evaluated the performance of the Loan Programs for the Farm Service Agency and Non-Traditional Financial Institutions. Policy recommendations were made regarding program performance and efficiency. <br /> <br /> <br /> Researchers have found that FSA market penetration rates for various borrower cohorts range from 0.8% to 4.6%. In general, beginning farmers have weaker financial characteristics than non-beginning farmers. Yet, the same result is not found when comparing socially disadvantaged farmers with non-socially disadvantaged farmers, such that there are few significant differences or the differences in financial characteristics are mixed. Overall, results indicate FSA direct farm loan borrowers have weaker financial characteristics than eligible, non-FSA direct farm loan borrowers, implying FSA is serving farmers likely to be denied credit by commercial lenders. In another study, results found that there was no convincing evidence that the FSA engaged in racial discrimination in response to a 1997 lawsuit. Members of the group assessed the factors that influence financing choices among agricultural producers. In particular, researchers found that female borrowers are more likely to submit successful applications to the Farm Service Agency.<br /> <br /> <br /> Researchers also evaluated the performance of microfinance institutions in developing countries. The results indicate that performance-based compensation of managers is not associated with better-performing MFIs. There was also evidence that lower wages suggested for mission-driven organizations worsen outreach, while managers experience improves performance. The results provide strong support for independent boards with limited employee participation. In the study region, external governance mechanisms seemed to play a limited role.<br /> <br /> <br /> Objective 3<br /> <br /> The members of NC-1014 have a long history of investigating the borrowing and financial behavior of agricultural producers and agribusinesses. Researchers have considered the access and use of agricultural credit important for a healthy rural economy. Thus, understanding the producers use of credit is important when evaluating the success of government sponsored lending programs and the competitiveness of the rural credit market. <br /> <br /> <br /> Researchers have found evidence that gross farm income, risk management strategies, and operator's age and risk aversion had significant influences on the likelihood of farm credit use by rural residence, intermediate, and commercial farms. Researchers also found weak evidence graduates of counseling had lower default hazard, but that their default behavior was more optimal. Overall, credit counseling seems to affect lenders profits, but the net effect should be evaluated both in terms of prepayment and default.<br /> <br /> <br /> Another study considered the types of management approaches in the production of cash-grains. Exploratory factor analysis identified three groups of managers: price negotiation, long-term cost control, and input adjustment. Farm operators using the price-negotiation approach are generally older, well-educated, risk-averse, and fulltime farmers who operate the largest and most specialized farms. Long-term cost control is adopted more typically by younger producers that are risk takers that farm diversified operations. Input adjustment was adopted by either older retiring producers or young producers trying alternative enterprises. <br /> <br /> <br /> Researchers also considered profitability and its variability for agricultural producers. Results indicate that regional profitability of agriculture production can have important policy implications. For example, there is evidence that farms and ranches are more likely to disappear from areas in which agriculture is more important in the local economy. In areas where agriculture is a small-part of the economy there are relatively more abundant opportunities to supplement farm profits with off-farm income and capital gains. Results of another study were also tempered by regional considerations. Researchers found that overall higher government payments would lessen wealth dispersion, though in two of ten regions the opposite was true. <br /> <br /> <br /> Members of the group identified opportunities for financial improvement among producers by eliminating risk in their operations. Specifically, researchers evaluated the usefulness of economic forecasts in decision making and the impact of reducing business risk on the financial-risk bearing capacity of a firm. In another research project researchers found evidence that diversified crop/livestock farms had a diversification discount of 5.8% in comparison with specialized crop or livestock farms from 1999 to 2001. Commodity diversified farms had a diversification discount of 9.4% in comparison with commodity specialized farms.<br /> <br /> <br /> Of interest to the members of NC-1014 is how off-farm income influences on farm behavior and profitability. One study found that producers with more off-farm income were more likely to adopt new technologies such as herbicide-resistant soybeans. Research also found that farms with non-farm business income had higher, non-farm net-worth and higher total household incomes. Many of these types of producers are beginning farmers with less than $100,000 gross farm sales, suggesting that they are successful business owners considering agriculture as an additional enterprise. <br /> <br /> <br /> Objective 4<br /> <br /> Of course the value of rural land is of great importance to agriculture given that it is the largest asset on the agricultural balance sheet. As a results, many NC-1014 members spend time considering rural land value, social capital, and rural entrepreneurship. <br /> <br /> <br /> Always of interest is the impact exogenous variables have on the value of rural lands. One research project found that Illinois farmland values decline with parcel size, ruralness, distance to Chicago and large cities, and swine farm density, and increase with soil productivity, population density, and personal income. Another group identified the positive impact that ethanol plants and the rise in housing prices have on rural land values. <br /> <br /> <br /> Members also assessed the value of rural social capital producers. In one study, there was evidence that when inputs were purchased locally and social capital was generated, the distribution of year-end funds has a slightly lower mean and longer left tail. The longer left tail results from additional borrowing arising from credit forbearance. If this forbearance were not available, the firm would be bankrupt. Members of the group identified the impacts capital moving from rural areas to urban areas. In particular, evidence showed that rural growth would benefit from an inflow of capital.<br /> <br />

Publications

Andersson, C., Holmgren, E., MacGregor, J., and Stage, J., Giving credit to the microlenders. Formal microlending, credit constraints and adverse selection: a case study of shrimp farmers in Bangladesh, International Institute for Environment and Development, Environmental Economics Programme, 2008. <br /> <br /> Asjaha, T.A., and Jooste, A., The Effect of Monetary Changes on Relative Agricultural Prices, Agrekon, Volume 46, Issue 4, December 2007.<br /> <br /> <br /> Bartolini, F., Gallerani, V., Raggi, M., and Viaggi, D., Modeling the Effectiveness of Cross-compliance Under Asymmetric Information, European Association of Agricultural Economists, 2008.<br /> <br /> <br /> Beyne, A.D., Determinants of off-farm participation decision of farm households in Ethiopia, Agrekon, Volume 47, Issue 1, March 2008.<br /> <br /> <br /> Briggeman, Brian C., Charles A. Towe, and Mitchell J. Morehart, Credit Constraints: Their Existence, Determinants, and Implications for U.S. Farm and Non-Farm Sole-Proprietors, American Journal of Agricultural Economics, 2008, Forthcoming<p> <br /> <p> <br /> Lusk, Jayson L. and Brian C. Briggeman, Food Values, American Journal of Agricultural Economics, 2008, Forthcoming<p> <br /> <p> <br /> Briggeman, Brian C. and Philip Kenkel, Customer Segmentation Perceptions of Farm Credit Associations, Agricultural Finance Review, 68(2008): 227-236<p> <br /> <p> <br /> Briggeman, Brian C., Allan W. Gray, and Joshua D. Detre, Using Limited Information to Support the Decision to Launch a New Product in the Fruit Juice Market: A Teaching Case Study, Review of Agricultural Economics, 30(2008): 370-378<p> <br /> <p> <br /> Boumtje, P.I., W. Florkowski, G. Landry, and C.L. Escalante. Determinants of Profitability Under Different Golf Business Ownership Structures: The Case of Golf Courses in Georgia. Southwestern Economic Review, forthcoming, Spring 2008. <br /> <br /> Brady, M., and Breneman, V., A Spatial Analysis of Farm Payment Recipients Using the FSA 1614 Dataset, American Agricultural Economics Association, 2008. http://purl.umn.edu/6418<br /> <br /> <br /> Ciaian, P.; and Swinnen, J.F.M, Credit Market Imperfections and the Distribution of Policy Rents: The Common Agricultural Policy in the New EU Member States, European Association of Agricultural Economists, 107th Seminar, January 2008. http://purl.umn.edu/6591<br /> <br /> <br /> Dixon, Bruce L., Bruce L. Ahrendsen, O. John Nwoha, Sandra J. Hamm, Diana D. Danforth. FSA Direct Farm Loan Program Graduation Rates and Reasons for Exiting. Journal of Agricultural and Applied Economics 39,3(December 2007):471-487.<p> <br /> <p> <br /> Featherstone, A.M. and M..W. Woolverton. Biofuels Production in the United States. New Zealand Journal of Primary Industry Management. September 2007. <br /> <br /> <br /> Friedrichsen, M., W. Nganje, Greg McKee, and C. Gustafson. Marginal Impact of Sales Consultant Visits and Financing Opportunities on the Adoption of Variable Rate Fertilizer Application. Agricultural Finance Review, Fall 2007. <br /> <br /> <br /> Good, D., and Irwin, S., So How Do I Make Corn and Soybean Pricing Decisions?, University of Illinois, Department of Agricultural and Consumer Economics, 2008.<br /> <br /> <br /> Hartarska V. and D. Nadolnyak (2007), Do Regulated Microfinance Institutions Achieve Better Sustainability and Outreach? Cross-Country Evidence, Applied Economics 39(10-12):1207-1222. <br /> <br /> <br /> Hennings, E., and A.L. Katchova. Growth Strategies of Farm Businesses: A Quantile Regression Approach. The Journal of American Academy of Business 12(2007): in press. <br /> <br /> <br /> <br /> Hyde, J. and B.A. Gloy. "Dynamic strategic responses among advertisers: the case of meat products." Economics Bulletin, 13:3(2007):1-14. <br /> <br /> <br /> Nganje, W., R. Hearne, and C. Gustafson. Farmers Preferences for Alternative Crop and Health Insurance Subsidies Review of Agricultural Economics, Forthcoming. <br /> <br /> <br /> Pendell, D.L. and A.M. Featherstone. Structural Breaks and Agricultural Asset Allocation. Agricultural Finance Review, Forthcoming. <br /> <br /> <br /> Rejesus, R. M., B.J. Sherrick, G.D. Schnitkey, and C.L. Escalante. Factors Influencing ProducersPerceptions about the Importance of Government Support Programs in Agriculture: Application of a Semi-Parametric Ordered Response Model. Applied Economics, forthcoming, 2008. <br /> <br /> <br /> Richter, Susan M., The Insurance Role of Remittances on Household Credit Demand, American Agricultural Economics Association>2008 Annual Meeting, July 27-29, 2008. http://purl.umn.edu/6261<br /> <br /> <br /> Rubin, O.D., Carriquiry, M., and Hayes, D.J., Implied Objectives of U.S. Biofuel Subsidies, Iowa State University, Center for Agricultural and Rural Development, 2008. <br /> <br /> <br /> Sanders, D., Irwin, S., and Merrin, R.P., The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?, University of Illinois>Department of Agricultural and Consumer Economics, 2008. <br /> <br /> <br /> Sanning, L.W., Shaffer, S., and Sharratt, J.M., Alternative investments: the case of wine, American Association of Wine Economists, 2007. <br /> <br /> <br /> Stokes, J.R. and B.A. Gloy. Mortgage Delinquency Migration: An Application of Maximum Entropy Econometrics. Journal of Real Estate Portfolio Management, 13:2(2007):153-160. <br /> <br /> <br /> Stranlund, J.K., and Zhang, W., Bankruptcy Risk and Imperfectly Enforced Emissions Taxes, University of Massachusetts, Amherst, Department of Resource Economics, 2008. <br /> <br /> <br /> Swenson, A. L., Financial Charactaristics of North Dakota Farms 2006-2007, Agribusiness and Applied Economics Report No. 633, Department of Agribusiness and Applied Economics, North Dakota State University, Fargo, 2008.<br /> <br /> <br /> Tannura, M., Irwin, S., and Good, D., Are Corn Trend Yields Increasing at a Faster Rate?, University of Illinois, Department of Agricultural and Consumer Economics, 2008.<br /> <br /> <br /> Veyssiere, L., and Marcoul, P., Impact of Supermarket Procurement System on Farmers' Credit Access, European Association of Agricultural Economists, 2008 International Congress, August 26-29, 2008. <br /> <br /> <br /> Yano, Y., and Blandford, D., Use of Penalties and Rewards in Agri-Environmental Policy, Agricultural Economics Society, Royal Agricultural College, Cirencester, UK March 31-April 2, 2008.<br /> <br /> <br /> Zimmel, P., and Carpenter, B., A Farm-level Economic Analysis of Wildlife Habitat Buffers in Missouri, Food and Agricultural Policy Research Institute at University of Missouri, 2007-2008. <br /> <br />

Impact Statements

1. Assisted in providing evaluation of the Farm Service Agencys Loan Guarantee Program that provides 2% of all production agricultural funds to underserved, deserving borrowers. This included evaluating graduation rates into other lending programs, success in serving underrepresented minorities, and factors that were strongly correlated with graduation.
2. Evaluated the impact of fluctuations in commodity prices on agricultural producers. In particular, as these fluctuations impacted production, crop insurance, marketing, and financing decisions.
3. Evaluated the impact of increasing demand for corn ehtanol and its impact on production agriculture. Specifically, noting the impact on rural communities, land values, and cropping decisions.
4. because of the sensitive nature of agriculture subsidies in trade discussions, the &lsquo;decoupling&lsquo; of production decisions from subsidies was considered. Members have found additional evidence that any effects of direct payments on acreage are likely to be modest. Furthermore, there is evidence that farmers who previously were unable to adjust production due to credit constraints are able to move to more optimal means of production after receiving the payments.

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Impact Statements

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