Forecast says farmers' income to drop 3 percent, due mainly to drought; crop insurance softens blow

U.S. farm income will drop 3 percent this year as a result of this summer's drought, according to the U.S. Department of Agriculture's Economic Research Service, which released its 2012 Farm Income Forecast yesterday. The report said that in spite of income loss, total farm income will be close to last year's record high, because most farmers have crop insurance and many benefited from higher grain princes caused by the drought.

According to the USDA, feed costs rose 18 percent this year, and will account for 40 percent of the rise in production costs, Charles Abbot of Reuters reports. Crop insurance will provide the largest increase in farm income, the report says. Production costs are expected to rise by 8 percent this year, which would outpace a gain in crop and livestock income. (Read more)