USDA Projects Record Farm Earnings in '04

A report from the U.S. Department of Agriculture (search) predicts that 2004 earnings for U.S. farmers will be 13 percent higher than last year's record numbers — more than $77 billion, or a $9 billion increase from the previous year.

"We have an extraordinarily strong livestock and livestock product sector," said Keith Collins, an economist for the USDA. "The beef market, the pork market, the chicken market and milk market have all been very strong, for example ... we have record-high corn, soybean, rice and cotton crops this year."

But some farming watchdogs warn that the other side of the story isn't being told.

Critics say without tax returns from 2004, the USDA's numbers are premature, and the claims of good news could be nothing more than a means from which to justify cuts to the overall farm budget.

"Farm programs and farm program payments have been under attack for some time with the attitude that we can import all of these products much more cheaply than we can produce it domestically. That is such a dangerous concept that we're rapidly heading in the direction of being a net farm product importer," said Kathleen Kelley of the Ranchers-Cattlemen Action Legal Fund (search) of the United Stockgrowers of America.

"Many of these cuts will be directly on the backs of farmers and ranchers," she said.

The numbers also don't mean much to those who live off the land. In Roggen, Colo., the Klausner brothers have watched family wheat farms around them disappear as they work to hold on to the farm their grandfather started in 1912.

"You'd think that you'd see the price of wheat or price of crops increase somewhat in 20-some, 25 years. It hasn't," said George Klausner.

Danny Klausner added that the price of a tractor has also increased so much over the years — one tractor can now cost as much as $250,000 — that the price of crops can't sustain many of the farms.

"You get $3.50 for a bushel of wheat, [it] takes quite a few bushels to pay for that [tractor]," he said.

Collins acknowledged that the measures put out by the USDA are for the U.S. farm economy as a whole, and is not meant as a measure of any one farm's or any one geographic region's performance.

"We know that we have farmers in, say, western Kansas or western Oklahoma that had drought this year whose incomes are down. We know that farmers in Florida were affected by hurricanes one after the other whose incomes are down," Collins said.

"You can go to different regions of the country and you can find different performances, but overall the preponderance of farmers have pretty good cash flows this year."

As for those record numbers, the government projects a slowdown in 2005 since the record crop yields are driving down prices. He offered some advice for family farms.

"They have to have a strategic plan. They have to know what they're good at, they have to stick with that. They have to manage their input costs, they have to be able to take advantage of the best technology," Collins said. "Most importantly, they have to take care of protecting themselves with price changes on the input side, such as interest-rate changes or energy changes and they have to protect themselves on the output side through having a good marketing plan."

But Kelley offered her own advice to the government, saying it's imperative that the USDA continue to uphold rules and regulations on agriculture to help control the trade balance deficit, which is reaching close to $1 billion this year. She said without watching for unnecessary imports, the United States could become a net importer.

"We have a common mythology that we are the bread basket to the world. The reality is we're now becoming the dumping ground for world products that no other country will take," Kelley said.

The Klausners say they know it's getting harder and harder to compete internationally, especially when other governments heavily subsidize their countries' farms. But they aren't ready to throw in the towel yet.

"It's a good life. I ain't going to complain," Danny Klausner said.

Click in the box near the top of the story to watch a report by FOX News' Carol McKinley.