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The adoption of several basic financial management practices is examined for a group of New York dairy farms. The study provides estimates of the extent to which various business analysis and control, investment analysis and decision making, and capital acquisition practices have been adopted. Many practices, such as net present value analysis, are not widely adopted by farmers. The relationship between the adoption of financial management practices and farm profitability is also examined. Results suggest that the adoption of financial management practices, such as using investment analysis techniques, significantly impacts farm financial performance.

Anaerobic digestion (AD) of livestock waste is a potential source of renewable energy and can reduce the methane emissions associated with livestock waste storage. Because AD is capital intensive, lenders will play a key role in the adoption of this technology. The purpose of this paper is to describe some of the barriers that currently make lenders reluctant to finance AD systems and provide recommendations for public policies that would reduce these barriers, making financing more available and encouraging farmers to adopt digester systems.

This paper describes some of the barriers that currently make lenders reluctant to finance AD systems and makes recommendations for public policies that would reduce these barriers, thus making finance available.

AD systems face a number of financial barriers which make lenders reluctant to finance them. Many of these barriers can be overcome by adopting policies and programs designed to improve the understanding of the financial situation associated with AD adoption and establishing markets that reward livestock operations for achieving the benefits associated with AD installation. Some of the more important potential solutions include developing mechanisms to collect and analyze data associated with AD system economics and developing markets that reward livestock operations for producing the non‐market outputs of renewable energy and methane emission reductions.

The ability to attract financing is a key barrier to the widespread adoption of anaerobic digester systems. This paper describes these challenges and identifies solutions which would reduce these barriers and lead to greater adoption of AD on the US livestock operations.

Several criteria that produce rankings of risk management strategies are evaluated. The criteria considered are expected return, value at risk, the Sharpe ratio, the necessary condition for first‐degree stochastic dominance with a risk‐free asset, and the necessary condition for second‐degree stochastic dominance with a risk‐free asset. The criteria performed relatively well in that the most desirable strategy under each criterion was always at least a member of the second‐degree stochastic dominance efficient set. There was also a relatively high degree of consistency between the highest ranked strategies under the various criteria. The effectiveness of the criteria increases as decision makers are assumed to be more risk averse and have greater access to financial leverage

Defaulting on a mortgage represents the ultimate consequence of past decisions to delay payment. While many modeling approaches are available to estimate the probability of default, most if not all require account‐level data. Further, past research has not attempted to estimate the probability that a current loan will transition among delinquency states prior to default. In this paper, we present an econometric approach that makes use of publicly available aggregate data for estimating the probability of delinquency and the probability of default. The results suggest the approach may have merit for monitoring bank performance as well as usefulness for banks’ risk management efforts.

Using empirical default probabilities and profitability distributions, a simulation model is developed to identify the long‐term value of relationships among differing credit rating and loan amount groups. According to the results generated from a set of lending relationships, agricultural lenders are pricing low and moderate credit rating customers such that similar long‐term values are found among the groups. Also, large loan amount relationships generate more dollars of lifetime value. The large relationships, however, earn fewer dollars of lifetime value per dollar of loan amount among risk peers. Implications are also drawn for the retention rates of existing customers.

Agricultural credit risk migration is examined using loan records gathered from four agricultural lenders. Results indicate that lender risk ratings are much more stable than ratings based on credit scores estimated from financial statements, highlighting the importance played by nonfinancial factors such as management capacity, character, and collateral in assessing credit risk. Additionally, the borrower’s risk tier, personal characteristics, and the stage of the business life cycle provide useful information in predicting credit quality downgrades, while the primary agricultural enterprise does not impact the likelihood of a downgrade.

The purpose of this paper is to identify how board size and board member compensation impact the operating performance of Farm Credit Associations. Cooperatives are a unique business structure that might not have profit maximization as a goal. Thus measures of performance other than return on equity are used to establish the link.

The paper uses regression to explain the relationship between board characteristics and performance.

The results of the models of return on assets and equity indicated that board size and compensation explain little of the variability in performance in these profitability measures. The results of the models of operating efficiencies explained a greater proportion of the variability in the operating efficiency and operating expenses‐to‐average assets ratios. In both models the relationship exhibited diminishing returns to board size and per member compensation.

The data are based on just one year of performance, limiting the generalizability of the results.

The paper includes implications for the size of boards of directors and director compensation.

This paper fulfils an identified need to study the impacts of boards of directors for cooperatives.

Lenders, regulatory agencies, and investors have increased their demand for credit risk exposure information to appropriately price risk and evaluate risk migration patterns that affect institution safety and soundness. This review provides a synthesis of the advances in credit risk assessment made through journal articles and other professional reports. Contributions in three primary areas are considered: (a) how the credit risk assessment problem has been defined and redefined over time in response to the changing information needs of lenders and regulators, (b) how methodological innovations have improved credit assessment procedures, and (c) how the efficiency of financial markets has changed due to the evolution of credit risk assessment. The paper concludes with a discussion of how transactional and relationship lending approaches are expected to evolve in the future and whether measures can be developed to more accurately assess factors such as management capacity and commitment to repay.

Corn ethanol plants consume large amounts of corn and their location has the potential to alter local crop prices and surrounding agricultural land values. The purpose of this paper is to analyze the local economic impact of ethanol plant locations on farmland values.

The relationship between ethanol plant location and agricultural land prices is examined using data obtained from the Agricultural Credit Survey administered by the Federal Reserve Bank of Kansas City.

The findings indicate that ethanol plant location has had an impact on land values. The portion of land price changes attributable to location is consistent with previous estimates of basis changes associated with ethanol plant location.

The paper finds that land markets appear to be rationally adjusting to the location of ethanol plants.

The purpose of this paper is to investigate the endogeneity of asset values and how it relates to farm financial stress in US agriculture. The authors conceptualize an implied measure of farm financial stress as a function of debt position. The authors posit that there are variations in the asset values that are beyond the farmer’s control and therefore have implications on farm debt.

The framework recognizes the endogeneity of return on assets (ROA). It uses a non-parametric technique to approximate the variance of expected ROA (VEROA). The authors model the rate of return on agricultural assets and interest rate with a formulation that focuses on macroeconomic policy. Further, the authors use a dynamic balanced panel data set from 1960 to 2011 for 15 US agricultural states from the Agricultural Resource Management Survey, and information from traditional state-level financial statements.

Estimation of linear dynamic debt panel data models accounting for the endogeneity of ROA and VEROA is a challenging task. Estimated variances are unstable. Hence, the authors focus on variance specification that uses the residuals squared from the ARIMA specification and non-parametric estimators. Arellano-Bover/Blundell-Bond generalized method of moments estimation procedures, although may be biased, show that VEROA has a negative and significant effect on the total amount of debt in the agricultural sector.

The instruments used in this analysis are lagged regressors which may be weakly correlated with the relevant first-order condition, hence not properly identifying the parameters of interest. Future research could include the identification of better instruments, potentially use of sequential moment conditions.

Unlike previous study, the authors use non-parametric approximation of VEROA. The authors model the rate of return on agricultural assets and interest rate with a formulation that focuses on macroeconomic policy. Second, the authors make use of a large dynamic balanced panel data set from 1960 to 2011 for 15 agricultural states in the USA. To the best of the authors’ knowledge, this study is one of the few that provides evidence on risk-balancing behavior at the agricultural sector level, of the USA.