* Net cash farm income forecast for $109.8 billion
* Commercial-scale farms notch 17 pct rise in income
* Double-digit increase in crop, livestock receipts
* Debt-to-asset ratio falls, sector is more solvent
* Rate of income gain slows, costs up 12 percent
By Charles Abbott
WASHINGTON, Nov 29 (Reuters) - Record-high prices for crops and livestock will lift U.S. farm income 19 percent this year, which for the first time will top $100 billion, the government estimated on Tuesday.
Another buoyant year is also in sight in 2012 for a agricultural boom that started in 2006, according to the U.S. Department of Agriculture.
Rising demand for food around the world, tight supplies and favorable exchange rates have boosted U.S. commodity prices and attracted investors, both in futures markets and in farmland.
While farmers are also seeing soaring land values, the rising fortunes could make the sector a bigger target in Congress where some lawmakers have been calling for a sharp cutback in farm subsidies.
Reformers say Congress should begin by ending a subsidy that pays grain, cotton and soybean growers $5 billion a year regardless of need.
Receipts from sales of crops are projected to rise by 16 percent this year, with corn, wheat and cotton seen up more than 30 percent and livestock revenue up nearly 16 percent.
"The 2011 forecasts, if realized, will mean record or near-record sales and price levels for many crop and livestock categories and represent substantial increases over last year," said USDA's Economic Research Service in a quarterly update.
CLOUDS ON THE SUNNY SECTOR
But the rate of gain for farm income was slower than in 2010, when net cash income rose by 21 percent, compared to this year's 19 percent. And USDA's forecast of 2011 net cash farm income, at $109.8 billion, was lower than the $114.8 billion estimated on Aug 31.
One reason was rapidly growing production costs -- up 12 percent this year at a record $320 billion, compared to a 2 percent rise in 2010. In August, USDA estimated costs would rise by 11.4 percent.
"Every expense except labor and electricity is forecast to increase in 2011," said USDA, with feed, fertilizer and fuel up by more than 20 percent each.
Analyst Mark McMinimy of Guggenheim Partners said higher costs "may tend to mitigate at least some of the projected higher crop and livestock product prices on net cash farm income" in the new year. An Iowa State University analysis said corn growers could face a 15 percent rise in production costs, aside from land, in 2012, said McMinimy.
Continued high farm income and full-throttle production will mean more business for processors such as Archer-Daniels-Midland Co , equipment makers such as Deere and Co and seed companies such as Monsanto Co .
RISING LAND VALUES MAKE LOAN EASIER TO CARRY
Growers in almost every region of the country will have higher incomes this year, thanks to the record-high prices for major crops and some livestock.
Farm land and building values are forecast to rise by an average 6.8 percent this year, following a 6.6 percent gain in 2010, said USDA. In two major regions, the rise is stratospheric -- up 25 percent in the Great Plains and in the Midwest, according to the Federal Reserve bank surveys.
"The three most important factors driving higher asset values (including farm real estate) are higher expected income from production assets, favorable borrowing costs, and expected growth of future returns on these investments," said USDA.
While assets are rising, farm debts are expected to decline slightly. Debt on real estate would drop by 3 percent. Overall, real estate debt is up 22.3 percent in the past five years as land values increased by 22.2 percent.
"Farm operators appear willing to pay up to maximum values for land based on expected profits accruing from the land's best use," said USDA.
Debt-to-asset and debt-to-equity ratios -- two key indicators of financial stress -- are expected to decline this year, "indicating that the farm sector overall is more solvent than it was in 2010," said USDA.
The debt-to-asset ratio was estimated at 10.4 this year, compared to 11.3 in 2010 and 11.8 in 2009. The debt-to-equity ratio was forecast for 11.6 this year, vs. 12.7 in 2010 and 13.3 in 2009.
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