North Dakota banker Ron Strand says he is part lender, part financial adviser, and part emotional supporter to farm customers who are suffering through their worst financial crunch since the mid-1980s.

But thanks to steady farmland values, he hasn't added another title: forecloser. "For the most part, amazingly, land values seem to be holding," said Mr. Strand, vice chairman of financial services at $6 billion-asset Community First Bankshares Inc. in Fargo. "How long that will continue with the prolonged depressed commodity prices is anybody's guess. But the fact that they are at least stable provides some comfort level to the borrower and the banker."

Indeed, agricultural lenders across the nation are breathing a collective - albeit cautious - sigh of relief that farmland values so far have not mirrored crop prices, which fell in 1998 and 1999 to lows not seen in decades.

Bankers are relieved because real estate is the biggest factor in calculating most farmers' total equity, a key measure that lenders study every year to determine whether to continue lending to a farmer. When farmland values plummet as they did in the 1980s, bankers are pressed to repossess these assets or force the borrower to liquidate land or machinery to pay down debt.

"We haven't seen the major swings, with land jumping from $800 an acre to $2,000 and then dropping down to $1,000 like we did in the '80s," said Bryan Strommen, a vice president at First State Bank of North Dakota, a $52 million-asset institution in Arthur.

Still, while farmland values gained steadily last year, they hardly created fortunes.

The U.S. Department of Agriculture found that farmland in 1999 increased in value by an average of 1.8% from the previous year, the smallest increase since 1992. In Louisiana, North Dakota, and Wyoming values dropped slightly.

In many states where land values rose, farmers may owe more gratitude to the booming overall economy than to other farmers' bidding up their neighbors' land, according to the Federal Reserve Bank of Chicago.

In a survey of bankers released late last year, the Chicago Fed found that conditions in the agriculture sector had taken most farmers out of the real estate market. But other buyers had propped up farmland values with purchases made for investment or vacation purposes.

Bankers also worry that the U.S. government's record payment of $22.5 billion to farmers last year might artificially hold up land values.

One Nebraska community banker said his farm customers cannot depend on such large subsidies year after year, so he counsels them against taking on more real estate or operating debt than they can repay.

"We have to explain to the borrower that it might not be in their best interest to throw more money into a business that isn't profitable on its own," said Mr. Pohlmann, president and chief executive officer of $48 million-asset Ravenna Bank. "If it's too much risk for the bank, we wouldn't be doing our farm customers any favors by lending them more money."

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