Summary: GAO discussed: (1) agricultural economic environment; (2) farmers' financial position; and (3) the performance of agricultural financial institutions. GAO found that: (1) in 1985, the agricultural industry faced adverse economic conditions due to increased production and decreased exports; (2) exports declined due to strong competition, importing countries' production gains, a weak world economy, and high real interest rates; (3) in 1986, more key farm commodities will be produced than will be consumed in the United States and their price is expected to decline further: (4) 1986 exports declined 15 percent, while imports rose 7 percent; (5) farmers' financial positions did not improve in 1985; and (6) farm income declined in 1985 due to low prices. GAO also found that: (1) farmers who were financially sound owed 33.7 percent of 1985 farm debt; (2) farm employment declined by over 4 percent; (3) five major lenders held $210 billion in farm debt; (4) the total debt owed to all major nonfederal lenders declined, while the debt owed to the Farmers Home Administration (FmHA) and the Commodity Credit Corporation increased; (5) lenders with a high portfolio concentration in agriculture continued to exhibit financial stress; (6) the Farm Credit System (FCS) had a $2.7-billion net loss in 1985 and reported a rising trend in farm loan charge-offs and in property acquired through foreclosures; (7) Congress restructured the Farm Credit Administration, established a mechanism for FCS to use its available resources to provide financial assistance to member institutions, and gave the Treasury authority to invest appropriated funds in FCS; and (8) in the first 6 months of 1986, FCS lost $968 million.
