Business Notes Agriculture

The loss was the largest ever suffered by a U.S. financial institution. But the victim was not a big-city bank with billions of dollars on loan to Mexico and Brazil. Instead, it was the Farm Credit System, a farmer-owned cooperative of 37 banks and 522 credit associations that makes agricultural loans. The F.C.S.'s 1985 deficit of $2.7 billion, reported last week, far surpassed the record $1.08 billion loss suffered by Continental Illinois bank in 1984.

The cause of the F.C.S.'s red ink is no mystery: the farm belt continues to suffer from its worst depression since the 1930s. Squeezed between low crop prices and falling land values, many farmers are sinking deeper and deeper into debt. By the end of 1985 borrowers were unable to make either interest or principal payments on $5.3 billion in F.C.S. loans, or 8% of its $66.6 billion portfolio.

Even so, the F.C.S. is in no danger of going bankrupt. It has a $3 billion reserve fund to cover further losses in 1986. Moreover, last year it followed the example of Chrysler in seeking a federal bailout. In December Congress passed a law designed to keep the supply of farm credit flowing by clearing the way for the F.C.S. to borrow money from the Government if necessary.