Many Midwest state governments. hoping to feed the rainfall of farm revenues their budgets count on, are continuing to lend an extra hand to the recession-worn agricultural industry.

Some heartland states have experienced more hardship than others. The variables include how much the number of farms has dropped and how tightfisted farmers have become because, of the region's 1980s recession and the current economy.

As the number of farms continues to decline in many areas, farmers are clinging to cautious financial practices they learned in the last decide.

Because the agricultural industry is considered the lifeblood of the economy throughout much of the Midwest, state governments are assisting farmers with innovative loan programs while they also try to diversify their economies.

In addition, federal support programs are helping many states either maintain or improve their revenues.

In Ohio, an innovative loan program has often made the difference in keeping family farms alive, according to state Treasurer Mary Ellen Withrow. She said one in five people in Ohio is employed in the agriculture industry.

The program, which received 2,390 applications in 1992, provides low-cost capital for farmers in the form of reduced-rate loans. The approach has been emulated in about 20 states and has injected $810 million into the Ohio agricultural economy since it began in 1985, the treasurer said.

'Unhooking' From Farms

"Ohio farmers are doing better since they do have this program. The fact that prices are far too low for farm products and the cost of equipment is high makes it very difficult," Ms. Withrow said.

A similar program in Illinois provides $200 million a year in loans to needy farmers, said Marj Halperin, spokeswoman for Illinois State Treasurer Patrick Quinn.

Ms. Halperin said the aim of the state's loan program is to help family farmers diversify their businesses.

"We want to help bring the family farm into the 21st century," she said. "We not only want to help the family farm maintain its business, we want to help it grow and diversify.

Alan Barkema, senior economist at the Federal Reserve Bank in Kansas City, said Illinois is one of the many states trying to "unhook" themselves from their reliance on agriculture.

Many farm states hope the emergence of food-processing operations will decrease their dependence on harvest revenues, Mr. Barkema said.

"States no longer want to be commodities producers but want to be food producers." he said.

Though South Dakota depends heavily on agriculture, it has enjoyed relative prosperity in recent years because of its diverse economy and agricultural assistance programs, according to Jim Hill, commissioner of the South Dakota Bureau of Finance and Management.

"The fluctuations don't have quite the ripple effect that they used to," Mr. Hill said, adding that agriculture makes up about 10% of the personal income in the state compared to about 25% a decade ago.

Meanwhile, North Dakota and Iowa have felt the repercussions of recent lackluster performances in the agricultural sector. Agriculture accounts for 41.7% of North Dakota's economy and a substantial portion of Iowa's.

Kathy Strombeck, a research analyst with the North Dakota tax department, said the state has had to make cuts in the last eight bienniums to balance its budgets, which have hovered around $1 billion every biennium.

"In many cases, we forecasted 3% or 4% or 5% increases in the budget," Ms. Strombeck said. "But to maintain our [basic costs] there was some shifting out of individual income taxes."

Sarah Vogel, commissioner of agriculture in North Dakota, said that in the last decade about one-third of its farming equipment dealers have left the business, which results in a loss of sales and income tax revenues.

Between 1935 and 1987, the number of farms in North Dakota declined to 35,000 from 84,000, she said. In addition, 22,000 people have moved out of the state since the early 1980s.

The decreasing number of farms has contributed to the financial hardships faced by many agriculture communities in states such as Iowa and North Dakota, according to Jack King, spokesman for American Farm Bureau, an organization that represents 75% of the nation's farmers.

Iowa State Treasurer Michael Fitzgerald said that revenue growth in fiscal 1992 in his state topped out at 4%, while the state expected 5 1/2% to 6% growth.

"Our revenue returns have been less than expected clearly because our agricultural economy is not as robust as we thought it would be." Mr. Fitzgerald said.

The Iowa economy relies heavily on the more than 100,000 farms that harvest mostly corn and soybeans or raise hogs and pigs, according to figures from the U.S. Census Bureau.

Mr. Fitzgerald was optimistic that federal subsidies coupled with increased trade with Mexico and the republics of the former Soviet Union would improve farm-related businesses.

On a national level, Mr. King said small to midsized farms have been disappearing, leading to the emergence of larger, more efficient farms.

"Farms are getting larger, but you're seeing fewer people in rural areas. So the production volume is the same, but there are fewer people accomplishing that," Mr. King said.

Price Supports

Farms with sales over $100,000 per year increased to 295,919 in 1987 from 221,668 in 1978, according to the U.S. Census Bureau. More recent figures were not available.

At the same time, smaller farms have decreased in number. For instance, farms with sales of between $25,000 to $49,999 annually slumped to 219,636 in 1987 from 300,515 in 1978, the Census Bureau said.

Wisconsin Treasurer Cathy Zeuske said the state has met its revenue projections in the last few years partly because of federal support for its dairy industry, which makes up $3.5 billion of the state's $5.7 billion gross agricultural income.

Federal price supports for dairy farmers and cheese processing businesses have helped stabilize the agricultural sector, Ms. Zeuske said. She added that harvests of peas, sweet corn, ginseng, green beans, and cranberries have further diversified Wisconsin's farm economy.

According to Mr. Barkema, the future holds "a mixed bag" for states that rely heavily on agriculture, not only because of recent hardships but also because of the consolidation of farms.

"It's fairly clear that we're going to see a patchwork of rural winners and losers," he said. "In some communities the site of a large scale livestock operation may help a community. But other communities may see smaller-scale operations dwindle, which may hurt some of those hard-pressed economies."

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