Farm Business Debt
Debt represents the claims on the firm's
assets by lenders, lessors, and other creditors. Liabilities are
obligations to pay others that have been incurred, but have not
yet been paid. Farm business debt, at the sector level, is reported
for farm purposes only.
What is included in farm business sector
debt?
Only debt incurred by those involved in
on-farm agricultural production is included in the balance
sheet. Debt held by firms or individuals performing the input
supply, processing, distributing, or marketing functions for farms
are excluded from the balance sheet.
What does real estate debt include?
While farm real estate accounts for more
than 80 percent of all farm business assets, real estate debt accounts
for about 55 percent of farm business debt. Real estate debt includes
mortgages and deeds of trust held by the Farm Credit System, commercial
banks, life insurance companies, the USDA's Farm Service Agency,
and individuals and others. The value of outstanding CCC loans for
storage and drying facilities is also included.
The farm business debt data series (for 1970-2002)
has been recently revised to better reflect the portion of debt
that is secured by farmland, but is used for nonfarm purposes. Historically,
farm business real estate debt has been estimated from debt levels
reported by various lenders, reduced by the portion of mortgage
debt attributed to operator dwelling. The current revisions generally
reflect a reduction in farm real estate debt to account for farmland
loans used for purposes unrelated to the farm business. AMRS data
suggest that as much as 10 percent of reported farm real estate
debt may be for nonfarm purposes.
The farm real estate debt series was revised
from 1970-1992 to adjust reported debt to reflect the gradual rise
in the share of reported debt for nonfarm purposes. Data for 2003,
and revisions for 1993-2002 were based a 3-year moving average of
farm real estate debt attributed to nonfarm purposes reported by
ARMS respondents.
What does nonreal estate debt include?
Nonreal estate debt is all debt not secured
by farm real estate, including loans for the purchase of machinery
and livestock. Since the balance sheet is prepared as of December
31 of each year, nonreal estate debt also includes seasonal production
loans that have been taken out and not yet repaid by year-end.
Commercial banks are the primary source
of nonreal estate debt. It is also provided by the Farm Credit System,
USDA's Farm Service Agency, and individuals and others, through
the financing divisions of machinery manufacturers and input suppliers.
The value of CCC commodity loans is not included, since these loans
have been reported as income in the year received. Slight revisions
have also been made to farm business nonreal estate debt, but the
bulk of the changes in total farm business debt are due to the revisions
to the real estate debt series.
What are the primary sources of data
for estimating the value of farm business debt?
Farm business real estate debt-Institutions
supplying loans to farmers generally report all debt secured by
farmland as real estate debt. Debt for nonfarm purposes and debt
on the operator's dwelling are usually reported as farm real estate
debt. As mentioned above, recent revisions to the farm real estate
debt data series have reduced lender-reported debt by a share attributed
to nonfarm purposes. The share of debt attributed to the operator's
dwelling is then deducted from real estate debt for farm purposes.
Debt reported in the farm sector balance sheet excludes these
two
components: nonfarm debt and debt on the operator's dwelling.
Farm
business nonreal estate debt—ARMS
respondents also report that a small share of nonreal estate debt,
typically reported at about 5 percent, was incurred for nonfarm
purposes. Historically, a similar percentage had been excluded
from
debt reported by institutions in estimating farm business nonreal
estate debt.
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