IDEAS home Printed from https://ideas.repec.org/a/mth/raee88/v9y2017i4p75-92.html
   My bibliography  Save this article

Factors Affecting Farm Loan Delinquency in the Southeast

Author

Listed:
  • Frederick Murdoch Quaye
  • Denis Nadolnyak
  • Valentina Hartarska

Abstract

This study examines the factors and behaviors that affect Southeast US farmers¡¯ ability to meet their loan repayment obligations within the stipulated loan term. The study uses a 10-year (2003-2012) pooled cross-sectional data from the USDA ARMS survey data (Phase III). A probit approach is used to regress delinquency against various borrower-specific, loan-specific, lender-specific, macroeconomic and climatic variables for the first part. The results show that farmers with larger farms, farmers with insurance, farmers with higher net income, farmers with smaller debt to asset ratio, farmers with single loans and those that take majority of their loans from sources apart from commercial banks are those that are less likely to be delinquent. Temperature and precipitation also affect outcomes, but by minute magnitudes.

Suggested Citation

  • Frederick Murdoch Quaye & Denis Nadolnyak & Valentina Hartarska, 2017. "Factors Affecting Farm Loan Delinquency in the Southeast," Research in Applied Economics, Macrothink Institute, vol. 9(4), pages 75-92, December.
    • Handle: RePEc:mth:raee88:v:9:y:2017:i:4:p:75-92
    as

    Download full text from publisher

    File URL: http://www.macrothink.org/journal/index.php/rae/article/view/12165
    Download Restriction: no
    File URL: http://www.macrothink.org/journal/index.php/rae/article/view/12165
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. McKenzie, Andrew M. & Kunda, Eugene L., 2009. "Managing Price Risk in Volatile Grain Markets, Issues and Potential Solutions," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 41(2), pages 353-362, August.
    2. Cesar Escalante & Minrong Song & Charles Dodson, 2016. "FSA farm loan repayment under economic recession and drought conditions," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 76(4), pages 445-461, November.
    3. Benjamin Collier & Ani L. Katchova & Jerry R. Skees, 2011. "Loan portfolio performance and El Niño, an intervention analysis," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 71(1), pages 98-119, May.
    4. Cai, Ruohong & Bergstrom, John C. & Mullen, Jeffrey D. & Wetzstein, Michael E., 2011. "Assessing the Effects of Climate Change on Farm Production and Profitability: Dynamic Simulation Approach," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103420, Agricultural and Applied Economics Association.
    5. Jayson Beckman & David Schimmelpfennig, 2015. "Determinants of farm income," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(3), pages 385-402, September.
    6. Patrick, Kevin & Ifft, Jennifer & Kuethe, Todd, 2013. "Debt Use by Farms with Crop Insurance," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 3, November.
    7. Allen M. Featherstone & Laura M. Roessler & Peter J. Barry, 2006. "Determining the Probability of Default and Risk-Rating Class for Loans in the Seventh Farm Credit District Portfolio," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(1), pages 4-23.
    8. Niels Pelka & Oliver Musshoff & Ron Weber, 2015. "Does weather matter? How rainfall affects credit risk in agricultural microfinance," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(2), pages 194-212, July.
    9. Ifft, Jennifer & Kuethe, Todd H. & Morehart, Mitchell, 2013. "Farm Debt Use by Farms with Crop Insurance," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 28(3), pages 1-5.
    10. Ani L. Katchova & Peter J. Barry, 2005. "Credit Risk Models and Agricultural Lending," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 194-205.
    11. Jennifer E Ifft & Todd Kuethe & Mitch Morehart, 2015. "Does federal crop insurance lead to higher farm debt use? Evidence from the Agricultural Resource Management Survey (ARMS)," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(3), pages 349-367, September.
    12. Ifft, Jennifer & Kuethe, Todd & Morehart, Mitch, 2015. "Does Federal Crop Insurance lead to higher farm debt use? Evidence from the Agricultural Resource Management Survey," Working Papers 250011, Cornell University, Department of Applied Economics and Management.
    13. Czura, Kristina & Klonner, Stefan, 2010. "The Tsunami and the Chit Fund- Evidence from the Indian Ocean Tsunami Hit on Credit Demand in South India," Proceedings of the German Development Economics Conference, Hannover 2010 46, Verein für Socialpolitik, Research Committee Development Economics.
    14. Durguner, Seda & Katchova, Ani L., 2007. "Credit Scoring Models in Illinois by Farm Type: Hog, Dairy, Beef and Grain," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9356, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Denis Nadolnyak & Valentina Hartarska & Xuan Shen, 2016. "Climate Variability and Agricultural Loan Delinquency in the US," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(12), pages 238-249, December.
    16. Berg, Gunhild & Schrader, Jan, 2012. "Access to credit, natural disasters, and relationship lending," Journal of Financial Intermediation, Elsevier, vol. 21(4), pages 549-568.
    17. Yan, Yan & Barry, Peter J. & Paulson, Nicholas D. & Schnitkey, Gary D., 2009. "Measurement of Farm Credit Risk: SUR Model and Simulation Approach," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49222, Agricultural and Applied Economics Association.
    18. Ifft, Jennifer & Patrick, Kevin & Novini, Amirdara, 2014. "Debt Use By U.S Farm Businesses, 1992-2011," Economic Information Bulletin 165912, United States Department of Agriculture, Economic Research Service.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Steele C. West & Amin W. Mugera & Ross S. Kingwell, 2024. "The impact of repayment obligations arising as a by‐product of input use on partial inefficiency: Evidence from Western Australian farm businesses," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 68(3), pages 678-700, July.
    2. Chen, Jian & Katchova, Ani L. & Zhou, Chenxi, 2021. "Agricultural loan delinquency prediction using machine learning methods," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(5), May.
    3. West, Steele, 2021. "The Estimation of Farm Business Inefficiency in the Presence of Debt Repayment," 2021 Conference, August 17-31, 2021, Virtual 315048, International Association of Agricultural Economists.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Quaye, Frederick & Hartarska, Valentina & Nadolnyak, Denis, 2015. "Farmer Credit Delinquency in Southeastern US: Factors and Behavior Prediction," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196914, Southern Agricultural Economics Association.
    2. Nathan D. DeLay & Brady Brewer & Allen Featherstone & David Boussios, 2023. "The impact of crop insurance on farm financial outcomes," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(1), pages 579-601, March.
    3. Aderajew, Tamirat S. & Du, Xiaoxue & Pennings, Joost M. E. & Trujillo-Barrera, Andres, 2020. "Farm-Level Risk-Balancing Behavior and the Role of Latent Heterogeneity," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 45(2), March.
    4. Rakhal Sarker & Truc Phan & Yu Na Lee & Alfons Weersink, 2022. "Business Risk Management Program and risk‐balancing in Ontario hog sector: An empirical analysis," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(4), pages 287-304, December.
    5. Eric J. Belasco & Kate Binzen Fuller, 2022. "Who buys crop insurance? Predictors of the participation gap between organic and conventional farms," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(3), pages 1554-1572, September.
    6. Sarker, Rakhal, 2021. "Farm Safety Net Payments and Risk Balancing in Ontario Beef Sector," 2021 Conference, August 17-31, 2021, Virtual 315321, International Association of Agricultural Economists.
    7. Sarker, Rakhal, 2024. "Farm Policy Support Payments and Risk Balancing Phenomenon in Grain and Oilseed Sector in Ontario, Canada," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344398, International Association of Agricultural Economists (IAAE).
    8. Amelie Jouault & Allen M. Featherstone, 2011. "Determining the Probability of Default of Agricultural Loans in a French Bank," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 1(1), pages 1-1.
    9. Ulf Römer & Oliver Musshoff, 2017. "Can agricultural credit scoring for microfinance institutions be implemented and improved by weather data?," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 78(1), pages 83-97, December.
    10. Peter Slade, 2021. "The impact of price hedging on subsidized insurance: Evidence from Canada," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(4), pages 447-464, December.
    11. Brei, Michael & Mohan, Preeya & Strobl, Eric, 2019. "The impact of natural disasters on the banking sector: Evidence from hurricane strikes in the Caribbean," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 232-239.
    12. Isma il Tijjani Idris & Sabri Nayan, 2017. "A Pooled Mean Group Approach to the Joint Effects of Oil Price Changes and Environmental Risks on Non-Performing Loans: Evidence from Organisation of the Petroleum Exporting the Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 7(3), pages 345-351.
    13. Ifft, Jennifer & Jodlowski, Margaret, 2017. "Federal crop insurance and agricultural credit use," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259120, Agricultural and Applied Economics Association.
    14. Eric J Belasco & Joseph Cooper & Vincent H Smith, 2020. "The Development of a Weather‐based Crop Disaster Program," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(1), pages 240-258, January.
    15. Geoffroy Enjolras & Magali Aubert, 2018. "Does crop insurance lead to better environmental practices? Evidence from French farms," Post-Print hal-02048349, HAL.
    16. Burns, Christopher & Prager, Daniel, "undated". "Do Direct Payments and Crop Insurance Influence Commercial Farm Survival and Decisions to Expand?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235693, Agricultural and Applied Economics Association.
    17. Benjamin L. Collier, 2020. "Strengthening Local Credit Markets Through Lender‐Level Index Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(2), pages 319-349, June.
    18. Adhikari, Sudip & Khanal, Aditya R., 2020. "Does higher business risk influence financial risk and induce savings among small agricultural operations? Findings from Tennessee," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304509, Agricultural and Applied Economics Association.
    19. Geoffroy Enjolras & Magali Aubert, 2020. "How does crop insurance influence pesticide use? Evidence from French farms," Review of Agricultural, Food and Environmental Studies, Springer, vol. 101(4), pages 461-485, December.
    20. Bos, Jaap & Li, Runliang, 2017. "Understanding the Trembles of Nature: How Do Disaster Experiences Shape Bank Risk Taking?," Research Memorandum 033, Maastricht University, Graduate School of Business and Economics (GSBE).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mth:raee88:v:9:y:2017:i:4:p:75-92. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Technical Support Office (email available below). General contact details of provider: http://www.macrothink.org/journal/index.php/rae .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.