Profit Efficiency of Farm Credit System Associations

Robert N. Collender, Richard Nehring and Agapi Somwaru

No 278606, Staff Reports from United States Department of Agriculture, Economic Research Service

Abstract: Nonparametric profit frontiers are used to measure economic efficiency of Farm Credit System associations. Evidence of inefficiencies among Farm Credit System associations is evaluated by geographic regions. Results indicate that many associations are efficient given shortrun constraints imposed by fixed investments and nonaccrual loans. However, further consolidation of associations may result in savings to taxpayers and borrowers. Associations generally appear to be too small and too numerous for the system to attain longrun profit efficiency, despite considerable consolidation over the past decade. Legislative history of the Farm Credit System indicates that profit inefficiencies would be politically acceptable if they were the price of increased credit availability to the agricultural sector. However, profit-inefficient associations, except those in Texas, are not characterized by excessive lending, compared with profit-efficient associations.

Keywords: Agricultural Finance; Financial Economics (search for similar items in EconPapers)
Pages: 21
Date: 1991-11
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uerssr:278606

DOI: 10.22004/ag.econ.278606

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