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Agriculture
AN EIGHTH DISTRICT PERSPECTIVE
SPRING 1986

Eighth District Agricultural Banking: Preliminary
Performance Data for 1985
Loan losses by farmers and their creditors continue to receive
much legislative attention. The Cooperative Farm Credit System
was reorganized and granted a line of credit from the U.S. Treasury
Department in December as a means of improving its chances
for survival. Now, both nationally and at the state level, legislation
is being drafted to assist agricultural banks that failed in record
numbers in 1985 and exhibited sharply deteriorating performance
statistics. In this issue of Perspective, we report and discuss
preliminary data on changes in the performance of Eighth District
agricultural banks relative to both prior years and other District
states.

Loan Losses and Agricultural
Bank Failures

Indications of Potential Future Losses
With District loan losses at agricultural banks increasing by 65
percent in 1985, it is important to evaluate whether losses are likely
to increase further this year. For a very crude assessment of these
prospects, the data in table 2 provide some guidance.
To predict future loan losses, one can look at the percent of
current loans that are in some form of trouble. These can be
classified as loans that are past due but still accruing interest, loans
that are past due but not accruing interest, and loans that have
been renegotiated. Consistent with the loss data in table 1,
increases in the percent of current loans most likely to become
future losses were concentrated in a few District states in 1985.
The categories “past due and still accruing interest” and
“renegotiated debt” were largely stable or declining last year, with
the exception of a tripling in the percent of loans classified as
“renegotiated” in Missouri. The percent of loans in nonaccrual
status, however, increased sharply in Arkansas, Illinois, Indiana
and Missouri. Increases in these states pushed the District ratio
of nonaccrual to total loans from 1.5 percent to 2 percent last year,
compared with the increase in the U.S. figure from 2 percent to
2.8 percent. Missouri again reported the highest individual figure
for a District state at 3.9 percent.

Sixty-eight agricultural banks failed in 1985, with five of these
banks located in the Eighth District. The largest concentration
of agricultural bank failures was in the Tenth Federal Reserve
District, headquartered in Kansas City, where 37 farm banks
failed.
Loan losses reported by agricultural banks in the seven states
of the Eighth District are reported in table 1 (see page 2). District­
wide, losses represented 1.65 percent of total loans in 1985, up
Summary
from 0.98 percent a year earlier. Losses in the District, however,
were nearly 25 percent less than the national average and less than
the loss ratios for four other Federal Reserve Districts with large
Loan losses and loans likely to become future losses increased
agricultural sectors: Chicago (2.34), Minneapolis (1.98), Kansas
nationally and in the Eighth District in 1985. Problems with farm
City (2.93) and Dallas (1.88).
debt at agricultural banks appear to be concentrated in several
Within the District, changes in loan losses varied widely by
states, while conditions in other states have remained stable or
state. Illinois, Indiana and Missouri registered
have shown some prelim inary signs of
substantial increases in loan losses, whereas the
improvement. The most severe farm debt
figures for Mississippi and Tennessee were
problems in the Eighth District are, concentrated
largely unchanged. Only Missouri and Illinois
in Missouri. The District as a whole, however,
had loss ratios greater than the District average,
THE
shows statistics on farm loan losses that are better
FEDERAL
with Missouri’s ratio also greater than the
than
the national average and better than
r e s f r m :
national average; only Colorado, Iowa and
H A N K of
conditions reported in four other Federal Reserve
S T . I X H IS
Nebraska were reported in the preliminary data
Districts with large agricultural sectors.
to have loan loss ratios greater than Missouri’s.
—Michael T. Belongia



SPRING 1986

FEDERAL RESERVE BANK OF ST. LOUIS

Table 1
Net Charge-Offs on Loans and Leases as a Percentage of Total Loans at Agricultural Banks1

Arkansas
Illinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee
Eighth District
United States

1970

1975

1980

1981

1982

1983

1984

1985

0.28
0.21
0.26
0.17
0.27
0.27
0.27
0.25
0.25

0.22
0.13
0.23
0.18
0.28
0.23
0.31
0.19
0.21

0.21
0.37
0.30
0.44
0.46
0.40
0.57
0.36
0.32

0.30
0.42
0.42
0.54
0.69
0.49
0.95
0.49
0.43

0.48
0.63
0.83
0.75
0.84
0.68
1.15
0.67
0.69

0.54
0.68
0.83
1.12
0.99
0.96
1.66
0.89
0.93

0.81
0.81
0.72
0.71
1.08
1.54
1.45
0.98
1.22

1.25
1.90
1.45
1.07
1.12
2.79
1.42
1.65
2.12

Agricultural banks are banks with a ratio of farm loans to total loans greater than the national average. Th e national average ratio was
16.15 percent as of December 31, 1985, down from 16.97 percent one year earlier.

Table 2
Past Due, Nonaccrual and Renegotiated Loans as a Percentage of Total Loans
Past due 90
days or more
and still
accruing

Arkansas
Illinois
Indiana
Kentucky
Mississippi
Missouri
Tennessee
Eighth District
United States

Nonaccrual

Renegotiated
“troubled”
debt

1984

1985

1984

1985

1984

1985

1.6
1.3
1.4
1.2
1.8
1.3
1.6
1.6
1.4

1.2
1.3
1.3
1.3
1.3
1.1
1.9
1.3
1.4

1.1
1.5
1.3
1.1
0.8
2.7
1.6
1.5
2.0

1.7
2.3
1.8
1.2
0.9
3.9
1.3
2.0
2.8

0.1
0.2
0.1
0.2
0.1
0.2
0.2
0.1
0.2

0.2
0.3
0.3
0.1
0.1
0.6
0.2
0.2
0.3

Agriculture—An Eighth District Perspective is a quarterly summary of agricultural conditions in the area served by the Federal
Reserve Bank of St. Louis. Single subscriptions are available free of charge by writing: Research and Public Information Department,
Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166. Views expressed are not necessarily official
positions of the Federal Reserve System.
2




FEDERAL RESERVE BANK OF ST. LOUIS

SPRING 1986

EIGHTH DISTRICT AGRICULTURAL DATA
Percent Change
Prices and Costs1
CONSUMER PRICE INDEX (% change)
Nonfood
Food

Dec.
1985
0.3%
0.8

Jan.
1986
0.4%
0.3

Feb.
1986
-0 .3 %
- 1 .0

Average Year-To-Date Same Month
19862
Year Ago
for 1985
0.3%
0.2

0.1%
- 0 .8

3.5%
1.0

PRODUCTION COSTS FOR FARMERS (% change)
All inputs
Fertilizer
Agricultural chemicals
Fuels and energy

0.0
-1 .5
0.0
0.5

0.7
0.0
0.0
- 1 .5

- 0 .7
0.0
0.0
7.4

- 0 .2
- 0 .7
-0 .1
0.3

0.0
0.0
0.0
- 8 .7

- 3 .3
- 7 .9
- 0 .8
-2 .1

PRICES RECEIVED BY FARMERS (% change)
All products
Livestock
Crops

0.8
- 0 .7
2.6

-3 .1
- 1 .5
- 4 .2

- 2 .4
- 2 .2
- 3 .5

- 0 .4
- 0 .5
- 0 .5

- 5 .5
- 3 .7
- 7 .6

-1 0 .4
- 9 .0
-1 2 .1

FEEDER CATTLE
Wholesale price - Kansas City ($/cwt.)

$60.98

$62.16

$62.42

$64.55

2.4

- 9 .6

FEEDER PIGS
Wholesale price - So. Missouri ($/head)

$28.65

$30.96

$37.26

$37.11

30.1

-1 5 .4

BROILERS
Wholesale price - 12-city ($/lb.)

48.72$

51.73$

48.99$

50.81$

0.6

- 5 .7

TURKEYS
Wholesale price - New York,
8-16 lb. young hens ($/lb.)

86.90$

60.25$

61.67$

75.48$

-2 9 .0

- 6 .0

CORN
Wholesale price - No. 2, yellow - St. Louis ($/bu.)

$ 2.59

$ 2.55

$ 2.50

$ 2.66

- 3 .5

-1 2 .0

SOYBEANS
Wholesale price - No. 1, yellow - Central Illinois ($/bu.)

$ 5.32

$ 5.45

$ 5.38

$ 5.56

-1 .1

- 8 .5

WHEAT
Wholesale price - No. 1, hard winter Kansas City ($/bu.)

$ 3.42

$ 3.32

$ 3.30

$ 3.39

- 3 .5

-1 1 .8

LONG-GRAIN RICE
Wholesale price - Arkansas ($/cwt.)

$17.25

$17.25

$17.25

$17.70

0.0

- 4 .2

1.9

9.7

COTTON
Average price received by U.S. Farmers ($/lb.)

53.30$

53.00$

54.30$

55.84$

Percent Change
U.S. Exports
Corn (mil. bu.)
Soybeans (mil. bu.)
Wheat (mil. bu.)
Rice (rough equivalent, mil. cwt.)
Cotton (thou, bales)




Oct.
1985

Nov.
1985

Dec.
1985

126.0
55.4
89.0
4.9
218.0

211.0
79.6
87.0
5.0
234.7

179.0
94.1
72.0
4.6
196.0

Average Year-To-Date Same Period
19852
for 1984
Year Ago
145.8
53.7
81.7
5.1
418.7

-1 3 .9 %
7.8
-4 6 .3
0.2
-7 0 .3

-1 3 .9 %
7.8
- 4 6 .3
0.2
-7 0 .3

3

NonReal-Estate Farm Debt Outstanding
Banks
Outstanding
($ millions)
U.S.
Eighth District4
Arkansas
Kentucky
Missouri
Tennessee

$35,494
2,482
405
587
1,225
324

PCAs3

Percent Change
12/84 - 12/85
12/83 - 12/85
-1 0 .2 %
-1 2 .3
-1 5 .6
- 0 .6
-1 6 .3
-1 1 .8

- 8.9%
-8 .9
-7 .6
-9 .8
-1 8 .4
-9 .0

Outstanding
($ millions)

Percent Change
12/84 - 12/85
12/83 - 12/85

NA
NA
$245
270
270
259

NA
NA
- 32.3%
-3 8 .9
-3 1 .7
-3 4 .6

NA
NA
-2 .3 %
-1 3 .8
-1 2 .3
-1 5 .6

Agricultural Bank Loan Performance5
Percent of Farm Loans
Overdue at
Agricultural Banks
12/85
U.S.
Eighth District4
Arkansas
Kentucky
Missouri
Tennessee

4.2%
5.5
5.3
4.5
6.7
6.0

12/84

Percent of Total Loans
Written Off at
Agricultural Banks
12/83

3.7%
4.9
3.4
3.7
5.4
7.1

2.9o/o
2.9
2.5
3.1
3.3
3.2

12/85

12/84

12/83

2.44%
1.93
1.24
.97
3.01
1.66

1.39%
1.18
.92
.91
1.66
1.80

.94%
.83
.64
.88
1.02
1.50

Agricultural Production Loan Interest Rate6
Banks

Eighth District Average

PCAs

2/86

2/85

12/85

12/84

11.8%

12.5%

12.2%

13.1%

1 The consumer price index components are seasonally adjusted. All other data are not seasonally adjusted.
2 Percent change from December of previous year, based on the most recent month available.
3 Source: Farm Credit Banks of Louisville and St. Louis, Farm Credit Administration.
4 Includes all of AR and parts of IL, IN, KY, MO, MS and TN.
5 Agricultural banks are defined as those with more than 25 percent of total loans in agricultural loans.
6 Interest rate data are for different dates. PCA rates are weighted averages for Arkansas and Missouri, not adjusted for stock purchase requirements.
Source: Farm Credit Banks of St. Louis.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102