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Agricultural Banks Were Strong Going Into Drought

July 28, 1988

WASHINGTON (AP) _ A preliminary review by the Agriculture Department says that many banks serving farmers were in much better shape going into this summer’s devastating drought than they would have been a few years ago.

The figures, which are far from conclusive, were compiled by the department’s Economic Research Service only through June 11. But economists were able to make some general observations based upon the situation leading up to and including the early months of the 1988 drought.

″Because changes in agricultural banking conditions tend to lag changes in the farm economy, banks will not feel the full effects of this year’s drought until 1989,″ the agency said.

Overall, the agency reports in a forthcoming issue of Agricultural Outlook magazine, agricultural commercial banks - those with above-average concentrations of farm loans - were rebounding as farmers entered the spring planting season.

″Farm banks are better poised to deal with losses from agricultural loans than they were a few years ago,″ the report said. ″Their delinquent farm loans have been falling since mid-1986, and the drop in real farmland values has bottomed out in most parts of the country.″

Even so, 20 percent of 543 agricultural banks classified as ″vulnerable″ at the beginning of this year are located in the worst drought counties, the report said. And a bank’s strength and performance in 1987 are important in judging how well it could withstand drought-related losses.

The report, which was prepared by agency economist Gregory Gajewski, said that forecasts before the drought indicated 40 to 60 agricultural banks might fail this year, fewer than the 75 failures in 1987, which was a post- Depression high.

Farm income nationally is expected to be little affected by the drought, but farmers in the drought-hit areas will suffer while others outside of those areas are expected to benefit from higher commodity prices.

″The farmers hit hardest will be unable to meet expenses this year, including repaying their local banks for farm credit used to put in this year’s aborted crop,″ the report said. ″Banks in the parched counties will take unexpected hits unless federal programs rescue the farmers.″

Legislation providing emergency drought relief for farmers is currently working its way through Congress.

″About 80 percent of the nation’s agricultural banks in drought counties with above-average probabilities of failure are in the north-central drought region,″ the report said. ″Agricultural banks in the region’s drought counties had a lower return on equity and a higher proportion of delinquent loans than did banks in nearby counties not hit by the drought.″

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WASHINGTON (AP) - A proposal by the Agriculture Department would require foreign countries selling meat and poultry to the United States to be certified annually that their programs to control drug contamination meet U.S. standards.

The proposal ″responds to the requirements″ of the 1985 farm law, said Lester M. Crawford, administrator of the department’s Food Safety and Inspection Service, or FSIS.

Under the plan, the agency would certify that each country - 34 now are eligible to ship meat and poultry into the United States - use reliable analytical methods to determine whether products contain residues of drugs or other chemicals that are within U.S. limits.

″For many years, we have required foreign countries that export meat and poultry to the United States to have a system of inspection that is equal to our domestic inspection system,″ Crawford said Wednesday.

He added: ″In recent years, the legal requirements governing how we regulate imported meat and poultry have become increasingly strict, especially with respect to oversight of residue-control programs.″

The proposal would provide that if a country’s program was not certified, the country would lose its eligibility to ship meat and poultry to the United States.

Public comments on the proposal can be sent through Sept. 26 to: Policy Office, Linda Carey, FSIS Hearing Clerk, Room 3171-S, USDA, Washington, D.C. 20250.

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WASHINGTON (AP) - Too much rain has slowed this summer’s grain harvest in the Soviet Union, according to an Agriculture Department report.

″Rains accompanied by strong winds reportedly have caused lodging (tangling), impeding the early grain harvest in European U.S.S.R. this year,″ the department’s Foreign Agricultural Service said Wednesday. ″Despite the unfavorable conditions, some areas are reporting excellent winter grain yields.″

As of July 18, grain and pulses, which include peas and beans, had been cut on 14.9 million hectares, of which 9.8 million had been threshed, the report said. That was below the four-year average of 23.5 million hectares cut and 18.6 million harvested by this time in 1983-86.

Even so, harvest progress is ahead of the year-ago pace when the season was late and only 8.9 million hectares were cut and 5.4 million harvested by now, the report said.

In all, the Soviet Union has around 116 million hectares for harvest this year. One hectare is equal to about 2.47 acres.

The 1987 Soviet grain harvest went on to produce an estimated 211.4 million metric tons, and this year’s has been forecast by USDA at 215 million tons, one of the largest on record.

A metric ton is about 2,205 pounds and is equal to 36.7 bushels of wheat or 39.4 bushels of corn.

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