Losses are likely to mount for farmers and their bankers in the wake of heavy rains in the upper Midwest.

The rains and subsequent floods could damage up to 35% of the $31 billion corn and soybean crop this year, by one estimate, with potentially serious repercussions for lenders.

"We're expecting some losses," said Robert Fishback, president of First National Bank in Brookings, S.D. "This is going to be very hard for the farmers and for the farm banks."

The wet weather has kept farmers from planting crops and has drowned major portions of planted fields in parts of Minnesota, Wisconsin, Iowa, and South Dakota.

Double Whammy

Though grain producers on the whole enjoyed bumper crops last year, the region lagged behind other parts of the country in last year's harvest because of inclement weather in the spring.

"In certain regions, things were already bad last year, and those are precisely the areas that got hit again now," said Edward Lotterman, agricultural economist at the Federal Reserve Bank of Minneapolis, who made the corn and soybean damage estimate.

"Farmers and bankers in some areas have a great deal to worry about," said Larry Wipf, regional economist at Norwest Corp. in Minneapolis. "After two years of bad crops and low yields, this could be the final blow for some highly leveraged farmers."

Federal Aid Sought

Though it is too early to assess the actual damage to this year's crops, the outlook is grim for farmers in southern Minnesota, northern Iowa, and eastern South Dakota.

Bankers are hoping for some relief from the federal government. In response to a letter from the agricultural commissioners of those states and Wisconsin, Secretary of Agriculture Mike Espy plans to visit the region this week.

A spokeswoman at the Minnesota Department of Agriculture said the state's farmers were asking for emergency federal grants as well as loans from the Farmers Home Administration.

But federal assistance will do little to stem banks' losses, according to industry analysts.

Low Prices Also Hurt

"It's still going to be trying," said Mr. Fishback, whose agricultural portfolio accounts for 40% of his $250 million-asset bank's loans.

Compounding the poor crop conditions has been relatively low prices for grain crops.

"Unless we get some strength in the marketplace, we'll break even at best," said Paul Pietz, agricultural loan officer at First American Bank Southwest, Marshall, Minn.

Though prices of grain futures contracts have risen recently at the Chicago Mercantile Exchange because of last year's record harvest, plenty of grain has been stockpiled, keeping prices low.

"That's the worst situation to be in - a poor crop while prices still are not good," said Mr. Lotterman at the Minneapolis Fed.

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