Despite the improving Midwest farm economy, agricultural banks in some states were reporting weak loan repayment rates and reduced farm incomes late last year, according to a recent survey.

Farm lenders contacted by the Kansas City Federal Reserve Bank said the average value of farmland in the district rose 1.5% during the fourth quarter of 1994 and 5.9% for the year - more than double the general inflation rate.

Loan demand remained strong during the quarter, farm lenders said, and their average loan-to-deposit ratio was more than 60%.

But loan extensions and renewals in the fourth quarter coincided with the lowest repayment rates on farm loans in two years, bankers reported.

Repayment rates weakened in Nebraska, Oklahoma, and the Rocky Mountain states, most likely due to livestock industry losses last year, the study concluded.

But a rebound in crop production boosted repayment rates in Missouri, it said.

The survey, based on responses from 318 agricultural banks in the 10th Federal Reserve District, was published in the Federal Reserve Bank of Kansas City's Regional Economic Digest for the first quarter of 1995.

The district includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and parts of Iowa, Missouri, and New Mexico.

Farm interest rates rose an average of 53 basis points in the fourth quarter, 1.31 basis points more than the increase in the fourth quarter of 1993, the survey said.

Looking ahead, almost 60% of respondents said they expected 1995 farm income to decline from 1994 levels, mostly on the livestock side.

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