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Variable Interest Rates and the Financial Performance of Dairy Farm Businesses

Published online by Cambridge University Press:  10 May 2017

Eddy L. LaDue  and
Gordon A. Zook
Eddy L. LaDue
Affiliation:
Department of Agricultural Economics, Cornell University
Gordon A. Zook
Affiliation:
Department of Agricultural Economics, Cornell University
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Extract

The increased variability of interest rates experienced during the early 1980s led many commercial banks to shift the interest rate they charge on farm loans from a fixed to a variable rate (Zook and LaDue). Although the Farm Credit System had used variable rates for a number of years, the index for their rate was the average cost of funds, which is less volatile than some of the rate indices used by commercial banks. Further, in contrast to the situation when the Farm Credit Service switched to variable rates, the shift of commercial banks to variable rates left most farmers with no fixed rate general credit source, no matter how important a fixed debt service commitment might be to their business.

Type
Articles
Information
Northeastern Journal of Agricultural and Resource Economics , Volume 13 , Issue 2 , October 1984 , pp. 229 - 237
Copyright
Copyright © 1984 Northeastern Agricultural and Resource Economics Association 

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Footnotes

The authors express appreciation to Loren Tauer, Bernard Stanton and two anonymous reviewers for comments on an earlier draft.

References

LaDue, Eddy L. “Influence of the Farm Credit System Stock Requirement on Actual Interest Rates.” Agricultural Finance Review, 43 (1983):51–60.Google Scholar
Smith, Stuart F. and Putnam, Linda D., Dairy Farm Management Business Summary, New York 1982. Department of Agricultural Economics Research Bulletin 83-32, Cornell University, September 1983.Google Scholar
Zook, Gordon A. Variable Rate Farm Loans and the Financial Performance of Dairy Farms. , Cornell University 1983.Google Scholar
Zook, Gordon A. and LaDue, Eddy L., Use and Characteristics of Variable Rate Loans to Farmers by New York Commercial Banks. Department of Agricultural Economics Research Bulletin 84-5, Cornell University, May 1984.Google Scholar