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The purpose of this paper is to estimate a three‐equation model of US commercial bank usage of the Farm Service Agency's (FSA) guaranteed operating loan and interest assistance programs. Also, to identify the key farm and banking variables that affect the decision to use loan guarantees and the volume of loans with interest assistance.

A triple hurdle, three‐equation system is estimated to model three decisions: to participate in the FSA operating loan program; whether to use interest assistance given the decision to participate in the operating loan program; and then the degree of participation in the interest assistance program. Statistical selection is modeled. Data on almost all commercial banks in the USA from 1995 to 2003 are used in the estimation sample.

Statistical selection is statistically significant so selection must be included in the models. Variables reflecting state‐level characteristics such as farm debt servicing ratio, individual bank loan‐to‐asset ratio, bank size and the general guaranteed loan and interest assistance environment are significant in all three equations. Intensity of interest assistance use varies markedly across states.

The interest assistance program has high subsidy costs and is an important source of support for financially marginal farmers. Scant prior research has investigated this program. The present study also shows that modeling interest assistance usage must be embedded in a larger model to give a complete specification.

The purpose of this paper is to identify determinants of feasible outcome events (expired with no loss, settled for loss, still performing) and time to event of Farm Service Agency (FSA) operating and farm ownership (FO) loan guarantees.

Data on 19,126 FSA guaranteed loans, which were made by various lenders to farmers who have limited ability to obtain loans from normal sources without the Federal guarantee, were collected. Cox proportional hazards models for operating loans (OLs) and FO loans are estimated to identify borrower characteristics, loan characteristics, lender types, and farm and macroeconomic environment factors that influence guarantee outcomes.

Loans with different characteristics (loan amount, loan term, lender type, region originated) and assistance programs (Beginning Farmer, Interest Assistance) have differing guarantee outcomes. Contemporaneous variables, in particular delinquency status, have a significant impact on guarantee outcomes.

All loans were originated in calendar years 2004 and 2005. Since FO loans may have as long as 40 year terms, results are not as robust for FO loans as for OLs.

Different loan characteristics and macroeconomic conditions significantly influence the occurrence of possible guarantee outcomes and time to the outcomes.

Guaranteed loans are the primary method of government credit assistance to US farm operators. Data on individual borrowers have been difficult to obtain for much of the life of the guaranteed program because loan applications are held privately. This study provides insight on how various factors drive guarantee performance which is useful to policy makers trying to increase guaranteed loan program efficiency.

The purpose of this paper is to examine credit usage by beginning farmers and ranchers (BFR). BFR credit usage is stratified by location (state) and by socially disadvantaged farmer and rancher (SDFR, also known as historically underserved) status. SDFR groups are defined to include women; individuals with Hispanic, Latino or Spanish Origin; individuals who identify as American Indian or Alaskan Native, Black or African American, Asian, Native Hawaiian or other Pacific Islander. Non-SDFR is defined as individuals who identify as non-Hispanic, White men.

The US Department of Agriculture’s Census of Agriculture, Agricultural Resource Management Survey (ARMS) is linked with Farm Service Agency (FSA) loan program administrative data to estimate shares of BFR operations using FSA credit. Census data provided information on population changes in total farms and BFR operations from 2012 to 2017 which are compared by SDFR status.

Results reveal differences among BFR operations active in agricultural credit markets by SDFR status and state. BFR were more common among SDFR groups as well as in regions where farms tend to be smaller, such as the Northeast, compared to a more highly agricultural upper Midwest. Among BFR, non-SDFR are more likely to utilize credit than SDFR, however, FSA appeared to be crucial in enabling BFR and especially beginning SDFR groups to access loans.

The results are timely and of keen interest to researchers, industry and policymakers and are expected to assist in developing and adjusting policies to effectively promote and improve BFR success in general and for beginning SDFR groups.

The purpose of this paper is to evaluate Alberta’s cattle loan guarantee program. It measures the risk premiums on lending that would accrue to banks participating in the program, estimates the value (price) of the loan guarantee, and estimates the interest subsidy provided by the program.

A cash flow model of cattle feeding is used. The model estimates a measure of risk that is applied to option pricing models to estimate the value of the guarantee.

Insurance premiums for the credit risk to lenders are 0.20 percent of the value of the loan for the entire feeding period, and 0.41 percent for backgrounding but negligible for finishing. The price of the loan guarantee estimated by the Black-Scholes model is 4.43 percent of the value of the loan and is comparable to prices estimated by the binomial model. The program provides a subsidy rate of 4.58 percent.

Charging a guarantee fee can potentially eliminate the interest subsidy inherent in the program. But this would necessitate determining the impact of the guarantee fee on the additional access to credit that has been achieved through the program.

Different levels of risk for backgrounding and finishing imply different risk premiums on cattle loans. Therefore interest on cattle loans should reflect not only the individual farmer’s risk profile but also the nature of the feeding operation.

This is the first paper to simultaneously estimate risk premiums on cattle feeding loans, the value of the loan guarantee provided by the Alberta Feeder Association Loan Guarantee Program, and the inherent interest subsidy.

The purpose of this paper is to analyze the repayment records of Farm Service Agency (FSA) borrowers in two distinct US farming regions that have been experienced serious drought conditions even as the US economy was going through a recession. The analysis will identify factors that significantly influence both the probability of FSA borrowers’ survival (capability to remain in good credit standing) and temporal endurance (or length of period of good standing with creditor).

This analysis utilizes a data set of farm borrowers of the Farm Service Agency that regular farm lenders have classified as “marginal” relative to other borrowers. The research goal is addressed by confining this study’s regional focus to the Southeast and Midwest that have both dealt with financial stress arising from abnormal natural and economic conditions prevailing during the same time period. A split population duration model is employed to separately identify determinants of the probability and duration of survival (condition of good credit standing).

This study’s results indicate that larger loan balances, declining commodity prices, and the severity of drought conditions have adversely affected both the borrowing farms’ probability of survival and temporal endurance in terms of maintaining non-delinquent borrower standing. Notably, Midwestern farms have been relatively less affected by drought conditions compared to Southeastern farms. This study’s results validate the contention that the farms’ capability to survive and the duration of their survival can be attributed to differences in regional resource endowments, farming activities, and business structures.

This study’s analytical framework departs from the basic duration model approach by considering temporal endurance, in addition to survival probability analysis. This study’s original contributions are enhanced by its specific focus on the contrasting farm business structures and operating environments in the Midwest and Southeast regions.

An established paradigm in small business lending is segmented by bank size with large banks more likely to lend to large informationally transparent firms while small banks are more likely to lend to small informationally opaque firms. In light of banking consolidation, this market segmentation can have implications for credit availability. Federal loan guarantees, such as those provided by USDA's Farm Service Agency (FSA) may reduce the risks of lending to informationally opaque firms thereby mitigating the impacts of the bank size lending paradigm. This paper aims to discuss these issues.

This analysis utilized a binomial logit procedure to determine if there was any empirical evidence that smaller community banks served a unique clientele of farmers when making FSA-guaranteed loans. The analysis relied on a unique data set which incorporated detailed data on farm businesses receiving FSA-guaranteed loans, loan characteristics, as well as information about the originating bank and characteristics of the local credit markets.

Results were consistent with the bank size lending paradigm with smaller banks being less likely to engage in fixed-asset lending, and more likely to serve a riskier and less established clientele when making guaranteed loans.

Data limitations did not permit detailed analysis of banks larger than $250 million in total assets nor for consideration of non-bank lenders. An expansion by these lender groups into serving more informationally opaque borrowers could mitigate any adverse impacts arising from fewer small community banks.

The results suggested that Federal guarantees do not completely eliminate the relative informational advantages of large and small size banks. And, continued bank consolidation, such that there are fewer small community banks, could result in less credit availability among smaller, less creditworthy farm businesses.

While FSA guarantees may not enhance a large banks propensity to serve informationally opaque farm borrowers, they may enhance the ability of smaller community banks to serve groups specifically targeted through FSA lending programs; the provision of credit to family farmers who, despite being creditworthy, are unable to obtain credit at reasonable rates and terms.

The analysis examines relationship between bank size and the use of FSA guarantees using a unique data set which incorporated information on FSA-guaranteed loans, farm financial characteristics, along with characteristics of commercial banks which participated in the FSA-guarantee program.

The U.S. Congress has been struggling to create a comprehensive energy program. A key component of the present attempt, recommended by President Carter, is a synthetic fuel program. In July of 1979, the President asked for an $88 billion “crash program” to encourage development of synthetic fuels. To date, a three month struggle to reach a consensus between House and Senate conferees has brought only limited results. Compromise is emerging in the form of a proposal for a “synthetic fuels corporation.” The body would have the authority to disperse $20 billion in the form of federal loan guarantees and purchase agreements with more money to become available later.

Beginning Farmer and Rancher programs are available for operators with ten years of experience or less on any farm. These programs support farmers who are starting operations, often without an initial asset allocation. However, some beginning farmers acquire operations that are already established, with substantial assets in place. The authors investigate whether a profitability gap exists between beginning farmers entering the industry ex novo and those operating a preexisting operation and if so, what factors contribute to the gap.

The authors utilize the Blinder-Oaxaca decomposition to determine what drives financial differences between first-generation beginning farmers, second-generation beginning farmers and established farmers using a unique farm-level panel dataset from 1997 to 2021.

Results indicate that first- and second-generation beginning farmers have similar operating profit margins, but first-generation beginning farmers have a statistically higher rate of return on assets than second-generation beginning farmers. Established farmers outperform second-generation beginning farmers on both the operating profit margin and rate of return on assets. These results suggest that economic viability for beginning farmers differs depending upon the initial status of their operation, suggesting that heterogenous policies may be more impactful in supporting various pathways to enter agriculture.

This analysis is the first to identify beginning farmers that enter the industry without an asset base and those that take over a principal operator role on an established farm through an assumed farm transition. The authors quantify differences in financial performance using detailed accrual-based financial data that tracks farms over time in one dataset.

The purpose of this paper is to examine changes in the structures of US farms and lenders and identify prospective implications for federal credit.

Data from US farm operations for 1996-2014 were adjusted to 2014 values using commodity price indices. Farm size groups were constructed by value of farm production to analyze changes in farm numbers, production, assets, debt, leverage, liquidity, profitability, land tenure, commodity type, contract production, organization type, and use of Farm Service Agency (FSA) direct and guaranteed loans by farm size. Bank, Farm Credit System (FCS), and FSA data from 1996 to 2015 were adjusted to 2014 values. Lender size groups were constructed to analyze changes in bank and association numbers, farm loans, and use of FSA guaranteed loans by lender size.

The greatest consolidation has been by farms with over $2 million in production. More farm debt is held by large, complex organizations, frequently with multiple operators, more variable income, and greater reliance on production contracts and operating and nonreal estate credit. Large farms have greater leverage, are more profitable, and have a larger share of household income from the farm. Banks and FCS institutions are fewer and larger, yet smaller institutions use FSA guarantees to a greater extent. Larger farms tend to be more reliant on both direct and guaranteed FSA loans and are likely to become more dependent on FSA credit.

Changing farm and lender structure together with softening farm income may require FSA farm loan program changes to meet any increase in loan demand. Policy alternatives are provided to meet changing demand for farm credit.

The purpose of this paper is to focus on public guarantees granted to micro-, small- and medium-sized enterprises (SMEs) by the Italian national credit guarantee programme (Fondo Centrale di Garanzia – Central Guarantee Fund – (CGF)). The CGF provides a direct guarantee to banks granting loans or a counter-guarantee to mutual guarantee institutions (MGIs) acting as first-level guarantors. Because the behaviour of MGIs could affect the default risk of counter-guaranteed loans, it is vital to investigate their operating and structural characteristics in order to identify an optimal design for public credit guarantee schemes (PCGSs).

Using regression models, the paper analyses the determinants of default for 33,229 SME loans guaranteed by an MGI and counter-guaranteed by the Italian CGF. The dependent variable is the ex-post default risk of SMEs’ counter-guaranteed loans in the 2010-2011 period. The explanatory variables are certain characteristics of the MGI.

The authors demonstrate that increases in an MGI’s leverage and the size of the counter-guaranteed portfolios increase the default risk. When the counter-guaranteed portfolio increases, MGIs are more risk taking but take less risk than when local and specialized MGIs are at play. Finally, direct public aid is relevant.

An appropriate design of the PCGS becomes crucial to controlling moral hazard in financial institutions and ensuring the financial sustainability of public intervention in favour of SMEs.

The paper evaluates an original and confidential firm-level data set that is not available in public documents or supervisory board statistics but is collected directly from the MGIs that participated in this study.