While the agency projected less farm income than it forecast earlier this year, it still expects the figure to top the previous record of $118 billion in 2011.
Net farm income in 2013 will be $120.6 billion, down 5.9 percent from a February forecast of $128.2 billion. The new forecast is up 6 percent from a revised estimate of $113.8 billion for 2012, the USDA said in a report on its website.
The USDA figures released Tuesday tell a "very, very good story, and a very positive story for much of U.S. agriculture," Patrick Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri, said in a telephone interview.
"A bigger question is, what's it going to look like a year from now?" Westhoff said. Projected prices for farm commodities are lower than they have been over the past two years, which could translate into lower revenue for farmers in two or three years, he said.
Total farm production expenses will increase 0.3 percent from the USDA's February estimate to $354.2 billion, the highest level on record, in nominal and inflation-adjusted dollars. The agency said it expects rent, labor and feed prices to increase the most among farm expenses this year.
Among farmer costs, feed, the biggest spending component, is projected to increase 3.7 percent from last year to $61.3 billion. Fertilizers made by Potash Corp. of Saskatchewan Inc. and other companies will cost $28.2 billion this year, down 1 percent from last year, while seeds from Monsanto Co. and DuPont Co. are up 4.9 percent to $21.3 billion.
"It's important to note that while income numbers are staying up at nice levels, production costs are continuing to climb and climb," Bob Young, chief economist for the American Farm Bureau Federation in Washington, said in a phone interview.
The value of crops sold to companies such as Cargill Inc. and Archer-Daniels-Midland Co. will be $211.1 billion, down 2.4 percent from the February estimate, the USDA said Tuesday. Revenue from livestock sales will increase 2 percent to $180.1 billion, the USDA said.
"After adjusting for inflation, 2013's net farm income is expected to be the second highest since 1973," the agency's Economic Research Service said in a statement on its website.
Corn and soybean inventories depleted by last year's drought may more than double by 2014, the USDA said in a separate report this month. Futures for the grain have dropped 27.6 percent percent so far this year before Tuesday, while the oilseed is trading at about the same price as it was at the beginning of the year. Wheat futures are down 15.8 percent.
Crop insurance for last year's drought, which sent corn yields to their lowest level since 1995, is buoying farmers. Farm-related income, which includes government-backed crop insurance, will total $36.9 billion, compared with $33.6 billion last year and $36.4 billion estimated in February, the USDA said.
Crop subsidies, excluding insurance assistance, may rise 4.7 percent this year to $11.1 billion, the USDA said. That assumes that the benefits will continue beyond Sept. 30 when the current farm bill expires. Both the U.S. Senate and House have approved bills that would eliminate about $5 billion in annual subsidies paid directly to farmers while boosting other support programs by smaller amounts.
Tuesday's estimates will be revised in November, after the harvest of major U.S. crops.