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Abstract

Commercial banks have invested heavily in US agricultural loans during the 1990s. Total farm debt has risen $32 billion from the start of the decade, with commercial banks accounting for $25 billion of the increase. The growth in bank farm lending means that a 54% of all indebted farm operators at the start of 1998 borrowed primarily from banks. Like all indebted farm operators, those borrowing primarily from banks had only modest amounts of debt going into the farm economy slowdown in 1998. Average debt-to-asset ratios for those borrowing primarily from banks was 22.6. However, about 12% of bank-held far debt was owed by bank customers with debt-to-asset ratios over 0.70 and this debt is vulnerable to default in the event of a sustained downturn in farm economic conditions.

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