Source: AUBURN UNIVERSITY submitted to NRP
AGRICULTURAL AND RURAL FINANCE MARKETS IN TRANSITION (NC1014, NC221, NCT-194)
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
HATCH
Reporting Frequency
Annual
Accession No.
0222111
Grant No.
(N/A)
Cumulative Award Amt.
(N/A)
Proposal No.
(N/A)
Multistate No.
NC-_OLD1177
Project Start Date
Oct 1, 2010
Project End Date
Sep 30, 2014
Grant Year
(N/A)
Program Code
[(N/A)]- (N/A)
Recipient Organization
AUBURN UNIVERSITY
108 M. WHITE SMITH HALL
AUBURN,AL 36849
Performing Department
Agri Economics & Rural Sociol
Non Technical Summary
The financial market crisis warrants research into how U.S. agriculture will be affected by volatility in commodity prices, surge in farmland values, need for bio-fuels, and climate change. Agriculture has evolved into a diverse and complex system exposed to many new risks including presence of GSE such as Farmer Mac and the Farm Credit System. Understanding these impacts on capital suppliers and those that use capital, is therefore, very important. Use of credit by farmers, rural businesses, and agribusinesses has a critical impact on their long-term sustainability. Work is needed to determine when and how much credit they should use and how to value and manage credit reserves in agriculture. Strengthening developing and emerging markets is important because these countries are important trade partners. Broadening and deepening financial markets in rural areas is what agricultural economists will continue to contribute using accumulated knowledge of similar domestic problems. Outputs: The development of an agricultural finance community of practice on eXtension Refereed journal articles Multi-state research bulletins Extension publications (e.g., fact sheets, bulletin updates, etc.) Popular press articles Papers presented at professional conferences Extension presentations delivering research findings and educational material The organization of special conference sessions at professional meetings Outcomes or projected Impacts: A strengthened network of scholars and industry participants economists capable of examining specific financial market policies affecting rural areas. Participants will discern local impacts of transition and change in financial markets. Impacts will likely differ across regions. A standardized set of investigative methodologies and assessment tools for analyzing the social, economic, and fiscal impact of the global financial crisis on rural financial markets. Publications and educational materials for public and private policymakers, financial industry and agribusiness leaders, and farmers and rural citizens that will help them understand this global financial crisis and what it means for themselves and their associated business and rural communities. Milestones: (2010): Organizational meeting to identify and prioritize the topics to be addressed under each objective. Development of detailed literature reviews for each objective. Development of current data inventory and data needs for the project. Report summaries from each objective and interim data development reports and analyses (2011): Descriptive summaries and analysis of preliminary data collected. (2012): Development of results and bulletins from data analysis. Development of symposium at professional meetings and completion of edited volume of results. Development of refereed publications and dissemination to lay audiences. Identification of additional priorities for each objective for further analysis. (2013): Final development and implementation of community of practice for eXtension.org. Initial analyses of priority projects identified in 2012 (2014): Development of final reports and summarization of key findings.
Animal Health Component
(N/A)
Research Effort Categories
Basic
(N/A)
Applied
(N/A)
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6026030301040%
6016020301010%
6066199301030%
6056110301010%
8016030301010%
Knowledge Area
601 - Economics of Agricultural Production and Farm Management; 602 - Business Management, Finance, and Taxation; 605 - Natural Resource and Environmental Economics; 801 - Individual and Family Resource Management; 606 - International Trade and Development;

Subject Of Investigation
6110 - Economy of the United States and sectors thereof; 6199 - Economy, general/other; 6020 - The family and its members; 6030 - The farm as an enterprise;

Field Of Science
3010 - Economics;
Goals / Objectives
Examine the impact of recent fluctuations in capital and commodity markets on the performance, management, and regulation of agricultural financial institutions Evaluate the management strategies, capital needs, and policy impacting the financial performance and long-term sustainability of firms in the food and agribusiness sector Identify financial institutions and services that benefit agricultural producers and rural communities and expand agricultural markets, especially those producers that are beginning, young, from socially disadvantaged groups, and/or involved in producing specialty crops Investigate capital structure, financial performance, and investment strategies of firms producing renewable energy in context of long term climate change. Implications of these findings for agriculture and rural communities will be delineated
Project Methods
1. Data collection and assembly 2. Developing and applying econometrics techniques to analyze the problems described above 3. Results dissemination via academic publications

Progress 10/01/10 to 09/30/14

Outputs
Target Audience:agricultural economists, farmers Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?One graduate student worked under this project - Frederick Quaye and he completed 2 essays of his 3 essays dissertation using the access to ARMS data provided under this project. In addition the project funded attendance to one professional conference. How have the results been disseminated to communities of interest? Nothing Reported What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? During the final year 2 academic articles were published. They were the result ofanalysis of the datasets previously created. In addition several working papers were completed using a special access to the ARMS dataset.

Publications

  • Type: Journal Articles Status: Published Year Published: 2014 Citation: Hartarska, V. Roy Mersland, and Denis Nadolnyak (2014) Are Women Better Bankers for the Poor: Evidence from Rural Microfinance Institutions? American Journal of Agricultural Economics 96 (5): 1291-1306.
  • Type: Journal Articles Status: Published Year Published: 2014 Citation: Delgado M., C Parmeter, V. Hartarska and R Mersland, (2014) Should All Microfinance Institutions Mobilize Microsavings? Evidence from Economies of Scope Empirical Economics 48:193225. DOI 10.1007/s00181-014-0861-3


Progress 01/01/13 to 09/30/13

Outputs
Target Audience: Targeted audiences were women farmers and financial institutions serving them. Scientific community, students and financial information consumers were also reached via presentations and publications. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? The project helped fund 5 trips of garduate studenst to present their work on thsi project at regional and national meetings. These three students were provided assistanship to complete various papers related to the research during that period. The project also funded access to ARMS data. How have the results been disseminated to communities of interest? Results were disseminated via articles in high quality scientific journals and conferences presentations. A notable presentation was to FED Reserve in St Louis and at FED Reserve in Kansas City, MO which attracted banking industry attention and resulted in an interview for a Washington DC based community banking journal targeting practiciorers and policy makers. What do you plan to do during the next reporting period to accomplish the goals? Complete work on goald 1 & 3 and esnure its publication in high quality scientific journals. Continue to apply for funding to further develop this line of research.

Impacts
What was accomplished under these goals? Under mu guidance, three gard students worked on various aspects on goals 1 and 3.

Publications

  • Type: Journal Articles Status: Published Year Published: 2013 Citation: Shen X., and V. Hartarska, (2013) Derivatives as Risk Management and Performance of Agricultural Banks Agricultural Finance Review, 73(2):290 - 309
  • Type: Theses/Dissertations Status: Accepted Year Published: 2013 Citation: 1. Xuan Shen Financial Derivatives and Bank Performance completed Summer 2013 2. Jaehuyk Lee, (co-advisor with Nadolnyak) Three Essays on the Economics of Climate Impacts on Agriculture completed Summer 2013.
  • Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: 2. Shen, X. and V. Hartarska Financial Derivatives at Community Banks, Community Banking in th 21st Century, Federal Reserve Bank of St Louis, October 3rd, 2013 http://www.stlouisfed.org/banking/community-banking-conference/video/financial-derivatives-community-banks-shelly-shen.cfm
  • Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: 4. Lee, J.*, Denis Nadolnyak, and Valentina Hartarska. The Impacts of Climate Change on Agricultural Production in the Southeast U.S. Selected paper presented at the Economics and Management of Risk in Agriculture and Natural Resources, (SCC-76 Information Exchange Group) Annual Meeting Pensacola, FL, March 1416, 2013. (online abstract)
  • Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: 5. Shen, X. and V. Hartarska, Agricultural Banks and Risk Management: An Endogenous Switching Model Annual Meeting of the SCC-76 "Economics and Management of Risk in Agriculture and Natural Resources" Group, March 14-16, 2013, Pensacola, Florida. (online abstract)
  • Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: 6. Shen, X. and V. Hartarska, 2013, Risk Management in Agricultural Banks: An Application of Endogenous Switching Model Southern Agricultural Economics Association Annual Meeting, February 2-5, 2013, Orlando, Florida. (online abstract)
  • Type: Conference Papers and Presentations Status: Other Year Published: 2013 Citation: 7. Quaye, Frederick Murdoch, Hartarska, Valentina M. Does Microfinance Alleviate the Financing Constraints of Ghanaian Small Businesses? Southern Agricultural Economics Association>2013 Annual Meeting, February 2-5, 2013, Orlando, Florida (online abstract)
  • Type: Conference Papers and Presentations Status: Accepted Year Published: 2013 Citation: 8. Li, S.*, D. Nadolnyak, and V. Hartarska. Agricultural Land Conversion in Lee County, Florida: Impacts of Economic and Natural Risk Factors in a Coastal Area. Journal of Agricultural and Applied Economics. Abstract 45(2013):577.
  • Type: Journal Articles Status: Published Year Published: 2013 Citation: 4. Nadolnyak D. and V. Hartarska, (2013) El Ni�o and Agricultural Lending in the Southeastern U.S.A. Southern Business and Economics Journal, 35(1).


Progress 01/01/12 to 12/31/12

Outputs
OUTPUTS: During the year I completed the analysis of survey data on Alabama farmers' finances and constrains to growth, and the impact of the financial crisis on their activities. I continued to work on understanding how derivatives improve risk management in agricultural banks and in the Farm Credit System, and consulted the Farm Credit Council on a project on the impact of FCS credit on rural communities. I was on the committee of one MS and 1 Phd student who graduated (Lina Cui & Le Wu). My 3 PhD students made significant progress in their research and we made 5 presentations at the 3 regional and national meetings (Southern Agricultural Economics Association, American Economics Association and the Agricultural and Applied Economics Association) and one presentation at the 1st International Conference on Agricultural Risk, Finance and Insurance in Beijing, China. My research work won the Outstanding Paper of the Year Award for 2012, for most cited paper of the year which is an inaugural award by the College of Agriculture, Auburn University. Substantial part of my time was devoted to facilitating the development of an exchange program for undergraduate students in COAG with ESA in France for which I won a travel grant with Dr. Nadolnyak. I hosted a graduate student from another French University in Spring 2012 and am serving on her dissertation committee. PARTICIPANTS: My graduate students Xuan Shen, Frederick Quaye, Jeahook Lee TARGET AUDIENCES: Target audiences are agricultural researchers and policymakers,farmers, including new farmers in Alabama who begun/expanded their operation since 2007, Farm Credit System leadership, employees and clients, agricultural commercial banks; Auburn CoAg students - graduate and undergraduate, 2 French universities constituencies with which I collaborated PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
My work resulted in 10 journal articles as well as posters and other presentations. With Dr. Nadolnyak we found that it is not the financial crisis itself that constrains Alabama new farmers' investment but structural problems related to availability of wealth and collateral, though we also observed that a shift towards accounting for your farmers' competence and profitability rather than just wealth. We found significant role for climate variability and impact on the performance indicators of agricultural producers and their lenders. With co-authors I identified the optimal scale and size of various financial insinuations serving agriculture from cooperatives to MFIs. We identified a positive role for risk management with derivatives in agricultural commercial banks. We also developed innovative methods to measure the impact of governance structures on performance in financial institutions. A student MS thesis identified specific impacts of services provided by AU extension officers, faculty and experimental station.

Publications

  • Hartarska, V., Shen, X., and R. Mersland. 2013 Scale Economies and Elasticities of Substitution in Microfinance Institutions, Journal of Banking and Finance, 371. p 118 to 131.
  • Hartarska, V. and D. Nadolnyak 2012 Financing Constraints and Access to Credit in Post Crisis Environment. Evidence from New Farmers in Alabama Journal of Agricultural and Applied Economics, p 444.1 to415
  • Caudill, S., D. Gropper, and V. Hartarska, 2012 Microfinance Institution Costs. Effects of Gender, Subsidies and Technology, Journal of Financial Economic Policy, 44. p292 to 319.
  • Hartarska V. D. Nadolnyak, and X. Shen, 2012 Efficiency in Microfinance Cooperatives Iberoamerican Journal of Development Studies, 12.p 53 to 74.
  • Hartarska, V., D. Nadolnyak, and X. Shen, 2012 Social Performance and Cost Minimizing MFI Size, Journal of Cost Management, September/October, p 20 to 28.
  • Nadolnyak D. and V. Hartarska, 2012 El Nino and Agricultural Lending in the Southeastern U.S.A. Southern Business and Economics Journal, 351&2.
  • Wu, T. Mixon, F., S Caudil, D. Gropper, V Hartarska, 2012 Does Input-Substitutability in Banking Differ across Accession. and Non-Accession Countries in Central and Eastern Europe? Journal of Economic Integration, 271. p195to205.
  • Hartarska, V., and R. Mersland, 2012, What Governance Mechanisms Promote Efficiency in Reaching Poor Clients? Evidence from Rated MFIs, European Financial Management, 182. P 218to 239.
  • Hartarska, V. and D. Nadolnyak, 2012 Board Size and Diversity as Governance Mechanisms in Community Development Loan Funds in the USA, Applied Economics, 4433. P 4313 to 4329
  • Nadolnyak, D., and V. Hartarska, 2012 Agricultural Disaster Payments in the Southeastern U.S.. Do Weather and Climate Variability Matter? Applied Economics, 4433. P 4331to4342.
  • Lee, J., D. Nadolnyak, and V. Hartarska. 2012 Impact of Climate Change on Agricultural Production in Asian Countries: Evidence From Panel Study. Selected paper presented at the 44 Annual Meeting of the Southern Agricultural Economics Association, Birmingham, Alabama, February, 2012. Abstract published online, with a citation page in the August issue of the Journal of Agricultural and Applied Economics, August 2012.
  • Shen, X. and V. Hartarska, 2012 Derivatives Use and the Performance of Agricultural Banks, Selected paper presented at the 44 Annual Meeting of the Southern Agricultural Economics Association, Birmingham, Alabama, February, 2012. Abstract published on-line, with a citation page in the August issue of the Journal of Agricultural and Applied Economics, August 2012.
  • Hartarska, V. and D. Nadolnyak, Financing Constraints and Access to Credit in Post Crisis Environment: Evidence from New Farmers in Alabama, Selected paper presented at the 44 Annual Meeting of the Southern Agricultural Economics Association, Birmingham, Alabama, February, 2012. Abstract published online, with a citation page in the August issue of the Journal of Agricultural and Applied Economics, August 2012.
  • Shen, Xuan and V. Hartarska, 2012.Risk management activities and performance of commercial banks: Evidence from agricultural banks. Proceeding of 1st International Agricultural Risk, Finance, and Insurance Conference, June 20,21. 2012. p12 to 34. Beijing, China


Progress 01/01/11 to 12/31/11

Outputs
OUTPUTS: Completed analysis of data from new framers survey and presented to several conferences: 1. Annual project NC1177 Ag Financial Markets in Transition group meeting in Denver Co, October 2011. 2. Accepted for presentation at the Southern Agricultural Economics Association Meeting in Birmingham , February 2012 Continued the analysis of long term climate variations on financial institutions resulting in several posters presented at the risk analysis group and Southeastern Climate Consortium. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
Results from the analysis of the survey of Finances of New Alabama farmers show that new farmers in Alabama face structural, not cyclical financing constraints. Specifically, the financial crisis itself did not affect(worsen or improve) access to financing. New farmers face financing constraints due to their inadequate collateral because agricultural lending remains collateral based. Nevertheless, there is evidence that lenders consider farmers profitability when they extend loans. Estimates from efficiency analysis in Farm Credit System Institutions show that insitutions are very efficient. Results indicate that long term climate variations may affect repayment rates of real estate backed loans by these institutions.

Publications

  • Nadolnyak, D., and V. Hartarska. 2012. Agricultural Disaster Payments in the Southeastern U.S.: Do weather and climate variability matter Applied Economics, 44(33): 4331-4342.
  • Hartarska, V. and D. Nadolnyak. 2012. Board Size and Diversity as Governance Mechanisms in Community Development Loan Funds in the USA, Applied Economics, 44(33): 4313-4329
  • Hartarska, V.; C. Parmeter, and D. Nadolnyak (2011) Economies of Scope of Lending and Mobilizing Deposits in Rural MFIs: a Semiparametric Analysis, American Journal of Agricultural Economics, 93(2):389-398.
  • Shen X.* and V. Hartarska. 2011. Risk Management Activities at Agricultural Banks proceedings from the PAWC Annual Meeting, Dec. 4-6, 2011
  • Hartarska, V., C. Parmeter, and R Mersland. 2011. Economies of Scope in Microfinance, paper presented at the International Conference Practice Meets Theory: What is the future of microfinance in the post Yunus era Sept 1-2, 2011, Adger University, Kristiansand, Norway
  • Nadolnyak, D., D. Vedenov, and V. Hartarska. 2011 The Value of Long-Term Climate Forecasts in Rainfall Index Insurance. Poster presented at the 18th Annual Conference of the European Association of Environmental and Resource Economist. Rome, July 2011.
  • Nadolnyak, D., V. Hartarska. 2011 Climate Impacts on Agricultural Loan Performance: Evidence from the Southeastern US. Presentation at the International Symposium on Climate Information for Managing Risks (CIMR), Orlando, FL on 24-26 May 2011. http://conference.ifas.ufl.edu/cimr/
  • D. Nadolnyak and V. Hartarska. 2011 Climate Impacts on Agricultural Loan Performance: Evidence from the Southeastern United States, Selected Paper presented at the Annual Conference of the SCC-76 (Economics and Management of Risk in Agriculture and Natural Resources group), Atlanta, March 2011.
  • Hartarska V., Nadolnyak D. 2011. What External Control Mechanisms Help Microfinance Institutions Meet the Needs of Marginal Clientele in Handbook of Microfinance edited by M. Labie B. Armedariaz (Eds.), pp.267-283. World Scientific Publishing. ISBN: 978-981-4295-65-9; 981-4295-65-5 http://www.worldscibooks.com/economics/7645.html


Progress 10/01/10 to 12/31/10

Outputs
OUTPUTS: Activities: Conducted a survey of new farmers in Alabama, analysed preliminary results, taught 2 classes and mentored 2 graduate students Invited Speaker at a World Bank seminar on economies of scope in Micro finance institutions Attended a workshop on Microfinance at the Free University of Brussels Belgium, met Nobel Peace Prize winner Dr. Yunus PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Alabama farmers policy makers PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
My work on scope economies in microfinance has contributed to better understanding of the conditions under which MFIs can profitably offer both savings and loans and when offering both will be costly. My survey of new and beginning farmers will help understand what financial and business constraints they face.

Publications

  • Hartarska, V., C.F. Parmeter, D. Nadolnyak, and B. Zhou. 2010. Economies of Scope in Microfinance: Differences across Output Measures, Pacific Economic Review, 15(4):464-481.
  • Nadolnyak, D., and V. Hartarska. 2010. Climate variability and bank lending in the Southeast USA, Agriculture and Agricultural Science Procedia, Elsevier pp.157-162. http://www.sciencedirect.com/science/journal/22107843
  • Hartarska V., Nadolnyak D 2010 What External Control Mechanisms Help Microfinance Institutions Meet the Needs of Marginal Clientele in Handbook of Microfinance edited by Marc Labie and Beatriz Armedariaz