The American Bankers Association says rural banks are working with farmers to restructure debt, provide operating credit and financial services as farm conditions worsen. More are requiring farmers to manage risk with contracts, crop insurance and hedging.

"By renewing and extending loans, banks are working to lower delinquency rats and keep farmers in operation," says John Blanchfield, director of the ABA Center for Agricultural and Rural Banking. Banks are using government loan guarantees and are borrowing money from the Federal Home Loan Banks to keep farmers and ranchers in business.

ABA surveyed 481 farm banks for information for the 12 months ending June 30. Farm banks are defined as having more than $2.5 million in farm production and farm real estate loans or more than 50% of their loan portfolio in farm lending.

While 99% of the banks surveyed plan to continue lending to farm customers, more are requiring those customers to manage risk with one or more techniques:

-44% require borrowers to carry crop insurance;

-41% have some loans for which farmers must have a contract for goods produced, and

-30% might ask farm borrowers to use hedging practices.

In an article published in the winter 2000 edition of the Journal of Agricultural Lending, Jane Yao, ABS associate director of surveys and statistics, says banks reported that the overall quality of their farm loan portfolio was relatively consistent with previous years.

"However, when analyzed further, we learned that nearly half (49%) of surveyed banks reported an increase in the rate of loan renewals and extensions for agricultural production loans. An equally significant proportion of banks experienced a decrease in the rate of loan repayments."

The complete study, the 1999 Farm Credit Survey Report, can be ordered through ABA customer service at 1-800-BANKERS for $75 for members and $150 for nonmembers. More information is available on the ABA web site at www.aba.com or www.agricultural-lending.com.