Ad hoc government payments impact on non-real estate farm debt

Abstract

PurposeThe authors examined the impact of the Market Facilitation Program (MFP) and Coronavirus Food Assistance Program (CFAP) payments to United States agricultural producers on non-real estate agricultural loans.Design/methodology/approachThe authors used quarterly, state-level commercial bank data from 2016–2020 to estimate dynamic panel models.FindingsThe authors found MFP and CFAP payments not associated with the percentage of non-real estate agricultural loans with payments over 90 days late. However, these payments associated with the percentage of non-real estate agricultural loans with payments between 30 and 89 days late. The available data utilized cannot consider when producers received the actual payment and what they specifically did with those funds.Originality/valueThe contribution of this study is for US policymakers and agricultural lenders. The findings could be helpful in designing and implementing future ad hoc payment programs and provide an understanding of potential shortcomings of the current safety net for agricultural producers in the Farm Bill. Additionally, findings can assist agricultural lenders in predicting the impact of ad hoc payments on their distressed loan portfolios.