Coasting for months on high crop prices and booming demand, some farmers are afraid that high farm incomes may drop this year.

Driven in part by increased foreign demand for American commodity crops like corn and soybeans (increased in large part thanks to changing dietary patterns in the developing world) and by domestic ethanol production, commodity crop prices are at all time highs. The spike in prices has vastly increased farm incomes.

These increases could shrink this year, however, according to officials at the U.S. Department of Agriculture. The high price of commodity crops has led to larger than ever crop acreage. This increased harvest will increase supply and lower costs, chipping away at farmers’ profits. In addition, increased costs have also lower net profits. Despite heavy investment into ethanol and alternative energy, American farms still require gasoline to function, and high gas prices have long been the Achilles heel of many successful farms.

According to USDA estimates, farm incomes will drop by about 6.5 percent, shrinking to $91.7 billion from record 2011 highs of $98.1 billion.

This decline could have major repercussions on farms across the country. Reassured by high crop prices, many farmers have been willing to trade away long cherished farm subsidies (most notably direct farm payments). If these subsidies disappear and farm prices continue to drop, many farmers may find themselves in a precarious situation.

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Written by: Justin Ellison / Farm Plus Staff Writer