Predictors of farm performance and repayment ability as factors for use in risk-rating models

This study investigates important factors that should be used by lenders in riskrating their farm customers. These factors predict actual farm performance and debt repayment ability. Linear and logistic regression models are used to identify the debt-to-asset ratio as a major predictor of repayment ability. In addition, the rate of asset turnover and family living expenses are strong predictors of farm performance. The results are tested over several time periods to verify the robustness of the predictors.