Agriculture: Waterlogged Crops Hurt Upper Midwest Farm Borrowers

Farther south the problem is drought, but for many farmers in in the Upper Midwest it's too much rain.

Waterlogged fields have dealt another blow to the dairy farmers who predominate in the region and had already seen feed prices rise.

"Every client that we deal with has been affected to one degree or another," said Dave Fahey, a vice president at $60 million-asset Union Bank and Trust in Evansville, Wis.

The situation may not be as bleak as in drought-stricken Oklahoma and Texas, where officials are predicting thousands of farm bankruptcies. But as federal farm subsidies erode and guaranteed farm income programs disappear, it's another worrisome reminder of how much farm borrowers, and their lenders, are at the weather's mercy.

"The whole Corn Belt has been affected this year," said Verne Sisson, vice president of agricultural lending at $88 million-asset Harvard (Ill.) State Bank. "Some of my older customers have said they have never seen such a wet spring, never such a prolonged period of rain."

Recent rainfall data from the Madison, Wis., airport demonstrate last month's moisture overload in south central Wisconsin. Rain from June 1 through 26 totaled 9.34 inches, according to the National Weather Service. The normal accumulation: 3.66 inches.

"We have quite a few people building arks," joked Tom Fenwick, a farm loan officer at $67 million-asset Bank of Brodhead, Wis., where the swollen Sugar River has flooded the fields. The most recent rains ended last week.

Many crops - which were planted late to begin with - won't survive their lengthy time under water, said John "Gof" Thomson, president of $59 million-asset Bank of New Glarus, Wis.

Some customers' corn will definitely not meet the "knee-high by the Fourth of July" standard and has telltale signs of too much moisture.

What farmers can salvage or replant depends on the weather the rest of the growing season and how early the first frost comes, lenders said.

However, they emphasized that they won't know until later this summer the rains' full impact on their customers' credits and how much restructuring they might have to do.

"I don't want to sound alarmist," said Mr. Fenwick, but "our area's a lot of dairy, and people are very worried about feed supply this fall."

Mr. Fahey of the Evansville bank predicted crop production would fall 10% to 20% below normal.

However, Mr. Thomson noted that higher milk prices would help pay dairy farmers' higher feed costs.

But as always, customers who haven't yet recovered from earlier difficulties are most problem-prone. "There's a few people who are right on the edge," said Mr. Sisson of the northern Illinois bank. "It might put a few of them out of business."

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