Farmland values in the Midwest dropped during the third quarter-the first decline in a decade-according to a survey released this week by the Federal Reserve Bank of Chicago.

In parts of Iowa, Indiana, and Illinois, land prices fell by as much as 6% from July 1 to Oct. 1., the quarterly survey of 390 agricultural bankers showed. Overall, land values declined 1% in the five-state Chicago Fed region.

Mike A. Singer, an agricultural economist at the Chicago Fed, blamed the decline on low crop and livestock prices, which were depressed by weak global export demand. In north-central Iowa, for example, hog farmers are getting the lowest pork prices in 27 years. Their land, in turn, has declined in value by 6% since June, the survey showed.

Bankers said they would wait until early next year-when most farmers renew their operating lines of credit-to fully evaluate the agricultural economy.

James E. Caspary, president of First National Bank of Clifton (Ill.), said that though land prices in his bank's region have fallen by as much as 5%, First National is not yet seeking additional loan collateral.

"The ag sector is still in pretty decent shape," he said. "It's been a lot worse."

The outlook, however, is not good. The Department of Agriculture announced last week that exports of farm products are expected to dip to $50.5 billion next year, down 6% from 1997 and 16% from 1996. Low export volume should dampen domestic prices again next year, economists said.

The Chicago Fed survey also indicated that bankers expect more farmers to come up short when it comes time to pay off their 1998 lines of credit early next year.

Two-thirds of the respondents said the repayment rate is declining compared with last year's. That pushed the survey's loan repayment rate index down by 19% from the second quarter index.

Grant C. Dean, vice president of Glenwood (Iowa) State Bank, said he expects some local corn and soybean growers will be unable to pay off their 1998 loans before asking to borrow for next year.

"When the dust settles, I think there will be some carry-over debt," he said.

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