UPDATE 1-Drought dents US farm-sector income - gov't estimate

Tue Nov 27, 2012 2:07pm EST
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* Net farm income down 3 pct from 2011's record

* Production costs up 8 pct, feed rises 18 pct

* Big increase expected in insurance payments

* Farm equity to top 2011 record as assets rise

By Charles Abbott

WASHINGTON, Nov 27 (Reuters) - U.S. farm income will drop by 3 percent this year, the result of surging production costs aggravated by crop losses that stemmed from the worst drought in half a century, the government said on Tuesday.

Even so, income would be close to the record high set in 2011, the Agriculture Department said. In a quarterly forecast, it said production costs would rise by 8 percent this year, outpacing a gain in crop and livestock income.

Feed costs are up 18 percent this year, the USDA said. Feed would account for 40 percent of the overall increase in costs.

"Despite gains in almost all sources of farm income, larger increases in farm expenditures, especially for purchased feed, have more than wiped out those price-led gains to farm income," it said.   Continued...