An overview of the linkages of the global financial crisis to production agriculture

Paul N. Ellinger and Vishwanath Tirupattur focus on the relation between the global financial crisis with agriculture production in the US. Securitization became a contributor not only to massive write-downs and losses in the global financial system but also in an ironically self-defeating manner led to the concentration of illiquid, hard-to-value credit risk assets in a relatively small number of institutions. Production agriculture is generally characterized as using a low amount of debt relative to assets. The primary institutional sources of debt capital for farms are commercial banks, the Farm Credit System, insurance companies, and captive finance companies. Credit availability generally for farmers and ranchers remained high through the first quarter of 2009, with grain farmers recording profitability in 2008. Although credit availability for US agriculture in spring 2009 remained adequate, profit margins have declined across the agricultural sector, and farmland prices are experiencing downward pressures.