Trade credit and agricultural commodity prices: evidence from the us dairy industry

Abstract Financing provided by suppliers or trade credit is a major source of short-term finance. Using a long-term panel data set of Northeast US dairy producers, we find a negative relationship between trade credit use and milk price. Additionally, regional dairy feed manufacturers reported that,...

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Bibliographic Details
Published in:European review of agricultural economics 2023-04, Vol.50 (2), p.529-562
Main Authors: Fiechter, Chad, Ifft, Jennifer
Format: Article
Language:English
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Summary:Abstract Financing provided by suppliers or trade credit is a major source of short-term finance. Using a long-term panel data set of Northeast US dairy producers, we find a negative relationship between trade credit use and milk price. Additionally, regional dairy feed manufacturers reported that, in a period of low milk prices, past due trade credit accumulated to 10 per cent of industry sales or approximately 100 million dollars. Both estimates suggest the possibility of producer default risk spreading through the dairy industry. Trade credit is often not publicly reported, hence financial regulators and policymakers may have difficulty observing this default risk.
ISSN:0165-1587
1464-3618
DOI:10.1093/erae/jbac010