Agricultural finance review

Friday, September 07, 2018

Much has changed in both the delivery and study of agricultural finance over the past century, but the fundamental necessities of credit delivery to production agriculture have not changed; farmers continually acquire land and machinery, purchase inputs and hire labor to plant crops in one period to produce output in a subsequent period.

The agricultural credit system facilitates financial decisions making by farmers by providing long-term mortgages for investment and short-term operating loans for working capital and credit reserves.

The farm financial stresses of the early 1900s impacted and destabilized not only farmers but also lenders, agriculturally related businesses and rural areas. Money was scarce in most rural areas where the majority of the population lived, and farming was the main occupation of rural households. Financing of production agriculture, especially long-term loans, was a difficult to obtain from commercial banks.

Because farmers had an urgent need for more and better long-term mortgage financing and lenders could be found, costs usually were high.

Farmers needed a source of credit with terms suited to their particular needs (operating loans, long-term mortgages, etc.) from lenders who understood their problems. The 1920s and the Great Depression era were significantly detrimental to farmers. With falling commodity prices farmers were unable to pay expenses or meet loan payments, leaving many FLBs with numerous defaults. Farm Credit System can be instrumental in helping farmers increase the food supply for more and more consumers around the world.

More importantly, Farm Credit System operating side to side with a robust commercial banking system remains a vital economic force for American agriculture.

New frontiers in the delivery and execution of credit policies and the understanding of credit on agricultural has had a significant impact not only farmers and consumers but also on policymakers. Outreach and engagement has been accomplished through published thesis and dissertations at various universities and through peer reviewed research.

 

A Guest Editorial