A new Virginia agricultural loan program, pushed through the state legislature two years ago by a group of investment banking firms, will end up benefiting only 18 farmers in the entire state.

Conceived by New York-based brokerage firm E. F. Hutton and pushed in Richmond by a politically influential lobbyist for Wheat First Securities, the state's largest brokerage firm, the Virginia Agricultural Development Authority had been lobbied to the General Assembly as an economic shot in the arm for a depressed farm economy.

But, because of a series of actions by the Reagan administration to curb such lending programs and what critics now say were inherent flaws in the structure of the program itself, the low-interest loans offered by the authority this spring stirred little reaction in rural Virginia. The authority had planned to issue up to $25 million in federally guaranteed, tax exempt bonds, with the proceeds loaned by commerical banks to Virginia farmers at a fixed rate, below market interest rates.

But despite efforts to advertise the program at seven meetings throughout the state earlier this year, the authority could find takers for only about $1.4 million in loans.

The 18 relatively well-to-do farmers who signed up for the loans represent little more than 3 percent of the 500 farmers the authority's backers had once told lawmakers the legislation would benefit.

"This thing could have been a good thing for some folks," said James Khee, the executive director of the Virginia Agricultural Development Authority. "It was a disappointment to all of us. This thing has been one trial after another."

In part, Khee said, the low sign-up rate was caused by lack of adequate publicity resulting in relatively few of the state's 60,000 farmers even being aware of the program's existence. But there are some who question whether many farmers had any use for the loans in the first place.

As structured by the legislature, the agricultural loans could only be used to purchase new real estate and farm machinery, a largely irrelevant concern to those farmers who have been struggling with sagging grain prices. And those prosperous farmers who did want to expand could probably afford nonsubsidized commercial bank loans anyway, critics said.

"Farmers are trying to hold on to what they got right now," said Alex Hamilton, spokesman for the Virginia Farm Bureau. "The major money they're interested in borrowing is operating funds. They're not interested in more money for real estate and machinery and getting further in debt."

Nevertheless, state officials blame the bond issue's problems primarily on the Reagan administration, which has attempted to curtail the explosive growth of industrial revenue bonds (IRBs)--tax free bonds floated by state and local governments on behalf of private business concerns. Agricultural IRBs, a relatively new wrinkle in the tax-exempt bond market, were cooked up four years ago by E. F. Hutton's public finance department, which has long enjoyed a lucrative trade in the underwriting of public bond issues.

In a nationwide lobbying campaign, Hutton executives traveled from state to state, persuading 18 legislatures to create authorities empowered to float the issues. In Richmond, Walter Craigie, an influential Republican fundraiser and the executive vice-president of Wheat First Securities Inc., was hired as lobbyist to steer the legislation through the General Assembly.

As it sailed through the 1981 session without dissent, legislators were clearly under the impression that the authority's loans would help a broad cross-section of Virginia agriculture.

"We thought it was an idea to help people who couldn't get money anywhere else to stay in farming," said state Sen. J. Dudley J. Emick (D-Botetourt), a member of the Senate Finance Committee, which approved the legislation. "I thought it would be available to a wide range of people."

Craigie and Hutton executives say, however, that they only sold the idea as a means of helping "younger and newer farmers" get on their feet. They do not, however, deny their own self-interest in pushing the legislation. Not long after the authority was created in 1981 and its members appointed by former Republican Gov. John Dalton, Hutton, Wheat First and Craigie Inc., an investment firm founded by Craigie's father, were selected as co-managers for its first bond issue.

In pushing the creation of the agriculture authority, "we were responding to a need for farm loans and what we thought was a good business opportunity," said David Seltzer, a vice president for E. F. Hutton. "There's no question that we're not a charitable organization." What Hutton hadn't counted on, however, was opposition by the Reagan administration, which has viewed the profilerating growth of tax-exempt IRBs as an inequitable allocation of credit and a multibillion-dollar drain on Treasury revenues.

"They're a distortion in the credit markets," said one Treasury official. "What you're doing is allowing private businesses to take advantage of the tax exemptions."

Early in March, the administration took its most damaging swipe at the IRB market-drafting legislation for Sen. Robert Dole (R-Kan.) that, effective April 15, would remove tax exemptions for IRBs that were guaranteed by the Federal Deposit Insurance Corp. or the Federal Savings and Loan Insurance Corp. Similar legislation had already been introduced in the House by Rep. J. J. Pickle (D-Tex.)

The mere fact that such legislation was being considered was enough to cripple the agricultural loans just as many of the state authorities, including Virginia's, were getting ready to float their first bonds. "It was a kick in the groin of all the authorities," said Seltzer.

Virginia officials, fearing that the bills might pass, rushed to meet the April 15 deadline and set a March 24 cutoff date for farmers to sign up with participating commercial banks--nearly two months earlier than the authority had originally planned. Only 32 farmers responded, and 14 of them later dropped out because they failed to meet credit tests set by commercial banks, Khee said.

The actions in Washington were also a kick in the groin for the investment bankers. The three firms had once planned to charge the state an underwriters fee of about 2.5 percent, which would have guaranteed them about $625,000 on the planned $25 million issue. But with only $1.4 million in loans and a $100,000 reserve, the offering totaled only $1.5 million, and the commission amounted to only 1.5 percent, producing $81,750 to be split among Hutton, Craigie and Wheat First, said William C. Boynest, an executive of Craigie Inc. "You don't make money on every deal."

Meanwhile, the question remains about how many farmers needed the agricultural loans in the first place. The loans average a little less than $100,000 per farmer and are going for such purposes as the installation of new milk parlors, hog feeders and feeding sheds, as well as for real estate purchases.

David S. Salmons, 28, of Virginia Beach, is receiving the largest loan--$241,000 at an interest rate of about 11 percent--to purchase 500 acres adjacent to his commercial hog farm.

"I could have borrowed the money somewhere else," said Salmons in a telephone interview. But, he added, he was attracted to the authority's offer of a fixed long-term interest rate, something that is no longer available in nonsubsidized commercial bank loans. "I was half scared that if I borrowed the money from a bank the interest rate would shoot back up to 16 percent," he said.

Another authority borrower, who asked not to be identified, was more skeptical about the program, though. This part-time farmer acknowledged that he is in no financial trouble and could have readily borrowed the money without the authority's subsidy. "But I'm going to take advantage of it if I can get it," he said.

"As far as I'm concerned this is a typical government program in that you got a bunch of politicians who sit up there and pass these things so they can run home and tell their constituents about it," the farmer added. "And it doesn't amount to a damn for anybody." CAPTION: Picture, Only 18 Virginia famers took advantage of state farm loan program that earmarked up to $25 million in low-interest, tax exempt bonds. Photo by John McDonnell -- The Washington Post