USDA estimates that net U.S. farm income would suffer a 26% hit due to drought, higher production costs and smaller government payments.

Net farm income for 2006 was estimated at $54.4 billion vs. $73.8 billion in 2005 and the 2004 record high of $85.4 billion.

Direct government payments to farmers are expected to drop by $6.1 billion or about 25% from last year's $24.3 billion. The value of U.S. ag production is seen falling $2.5 billion to $273 million. Crop production value is seen rising $1.3 billion, with livestock production value falling $6.5 billion.