By Jesse Newman 

U.S. farm incomes will decline 36% this year to the lowest level in nine years, the U.S. Department of Agriculture projected Tuesday, reflecting a continued slump in crop prices and recent weakness in the dairy and hog markets.

Net farm income will drop to $58.3 billion from $91.1 billion in 2014, marking the largest percentage decline since 1983, including when figures are adjusted for inflation. The projected decrease would mark the second consecutive drop after incomes reached nominal record highs in 2013, according to the USDA.

The USDA revised lower its February estimate for a 32% decline in farm income, mainly due to a diminished outlook for livestock farmers. The government said their revenues could drop more than 9%, wider than its February forecast for a 5% decrease, because of lower milk and hog prices.

The softening outlook for farm incomes comes amid a continued downturn in the U.S. agricultural economy triggered by record corn and soybean crops in the past few years. U.S. growers this autumn are expected to produce bumper harvests again, which has kept prices depressed for the two commodities.

The downdraft in the Farm Belt follows a boom during much of the past decade as crop prices and land values soared thanks to drought and rising demand for corn, the biggest U.S. crop by value, from the ethanol industry and overseas buyers. Net farm income almost doubled from 2006 through 2011.

This year, futures prices for corn already have fallen 7% since the end of 2014, while soybean prices are down nearly 12% and trading at the lowest levels in about six years.

"I think we have a couple of tough years coming," said Illinois farmer David Justison, 59 years old, as he hauled grain to a river terminal in St. Louis.

Mr. Justison said falling crop prices have significantly reduced cash flow for many Midwestern growers, forcing them to carefully scrutinize what once were regular purchases. "We've pretty much stopped buying machinery," he said.

The farm-industry slump is hurting large agricultural-equipment suppliers and seed makers. Last week, Deere & Co., the world's largest seller of tractors and harvesting combines, said its profit in its July-ended third quarter tumbled 40% as weak crop prices curb farmers' appetite for new equipment.

Largely favorable weather this summer has led to expectations that U.S. farmers will harvest big crops, though smaller than last year's record hauls. The USDA earlier this month estimated that the nation's corn crop will reach 13.7 billion bushels, the third-largest crop in U.S. history. Government forecasters also estimated the soybean crop would be the second-largest ever.

With ample grain supplies and concerns over demand for U.S. crops weighing on prices, the USDA on Tuesday projected that annual crop receipts would fall to $195 billion this year from $207.9 billion last year. That includes a $7.1 billion decline in cash receipts for corn. The USDA said corn receipts have fallen 35% since they reached record highs in 2012.

The agency forecast a more than 9% decrease in livestock receipts, thanks largely to a decline in dairy and hog revenues amid increasing production of both milk and pork and lower prices. Revenue from broiler chickens is also expected to decline as export bans linked to a highly contagious strain of bird flu increase U.S. inventories and push prices lower, the government said.

Government forecasters expect a 29% drop in dairy receipts in 2015, as well as a 27% decline for hogs.

The USDA on Tuesday also revised lower its estimate for net farm income in 2014, pegging last year's figure at $91.1 billion, versus the government's February estimate of $108 billion.

Federal forecasters said after years of prosperity in the farm sector, debt-to-asset ratios among farmers are expected to rise this year, a sign of increasing financial strain on agricultural operators. Still, the ratios remain at relatively low levels.

One bright spot in the Farm Belt is the USDA's prediction that production expenses will fall this year for the first time since 2009, with decreased energy costs among the largest expected declines. Fuel and oil costs likely will decline by almost 28%, according to the USDA, while expenses related to the three main crop inputs--seeds, fertilizer and pesticides--also will decrease.

Write to Jesse Newman at jesse.newman@wsj.com

(END) Dow Jones Newswires

August 25, 2015 16:01 ET (20:01 GMT)