An Analysis of Risk Premia in U.S. Farm-Level Interest Rates

Barry K. Goodwin, Ashok K. Mishra

Elsewhere No. (0101), January 2000

Traditional family farms may face certain forms and sources of risks, while modern, corporate farm structures may face other types of risk. The belief that agriculture has greater inherent financial risk than other sectors of the eco-nomy underlies the philosophy of most government farm programs. Identifying the determinants of farm financial risk is essential to understanding the effects and operation of farm programs. Policymakers may desire to direct support toward certain segments of the farming population on the basis of differences in realized financial risks. Therefore, the objective of this article is to empirically consider factors related to financial risks on U.S. farms.

Keywords: risk management, interest rates, farm structure, diversification, lending rates, lenders, Economic Research Service, ERS, USDA, U.S. Department of Agriculture

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Updated date: January 2000