AGRICULTURAL AND RURAL FINANCE MARKETS IN TRANSITION (NC1014, NC221, NCT-194)

1. In recent decades, rural financial markets have undergone a period of rapid transition to adapt to structural changes in the agricultural economy and the financial services industry. The U.S. agriculture, on one hand, has undergone massive consolidation and integration since the 20th century. At the lenders' front, on the other hand, the U.S. government began its relaxation of laws regulating the banking sector in the 1980s by eliminating regulatory barriers to mergers and acquisitions. The effects of deregulation in reshaping the banking industry and increasing the level of financial innovation had substantial impacts on competition within the industry (Northcoth, 2004). Meanwhile, commercial banks have been increasingly involved in farm lending as agricultural debt comprised about 33% of their total loan portfolios in the last decade (Stam et al., 2003; Walraven et al., 1993). In the farm sector's national balance sheets released annually by USDA's Economic Research Service, commercial banks continue to be the dominant provider of agricultural loans. As in any competitive industry, banks have always been pressured to implement innovative business strategies that enhance operating efficiency in order to sustain their competitiveness in the industry. These business strategies are vital to the health of the rural economy, considering the banks' role in influencing regional flows of funds (Samolyk, 1989). This study will identify strategies for maintaining and/or enhancing cost efficiencies of agricultural banks. 2. The impending changes in the farm labor market conditions will be expected to have significant effects on farm operations that are heavily labor-intensive. Organic farming, an economically and environmentally sustainable farming system, is a more labor-intensive operation compared to the conventional farming system that employs larger farm machineries and synthetic agrichemicals. The organic farms' characteristic limited use of synthetic chemical inputs requires them to implement alternative techniques for pest removal, soil additions and conservation that are usually done manually. Organic farmers in the Southeastern region face even more challenging growing conditions. The region's mild winters, long warm summers and abundant moisture define the need for soil enhancement management techniques to address the rapid decomposition of organic matter and the more compounded weed and pest problems. Moreover, this research will fill in organic farming data gaps in the Southeast, which has been poorly represented in national survey data. This study will employ both quantitative and qualitative research methods by conducting a survey and several case studies, respectively. These approaches will elicit responses from farmers on their strategic plans responding to the expected changes in the farm labor market conditions and their repercussions on the farm business. Specifically, the survey will be conducted among organic, transitioning, and conventional farms in Georgia, North Carolina, South Carolina, Alabama, and Mississippi.