A farmer harvests his corn crop in September 2007 near Morris, Ill.
A farmer harvests his corn crop in September 2007 near Morris, Ill. - 
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KAI RYSSDAL: This recession so far has been relatively kind to farmers. Everybody's got to eat, after all. But now the bad economy is starting to eat into their profits. According to a forecast by the U.S. Agriculture Department this week, farm profits are expected to fall 38 percent this year.

Marketplace's Jeff Tyler reports.

Jeff Tyler: Profits are falling, but it's worth remembering that they were at record levels for the ag industry last year.

Bill Lapp is with Advanced Economic Solutions in Omaha, Neb. He says commodity prices need to be considered in context.

Bill Lapp: While corn prices -- there's a lot of discussion about how much they've declined -- they actually remain well above historic norms.

That has kept costs high for animal feed, eating into profits for livestock and dairy farmers.

Daryll Ray: Those two sectors within agriculture right now are far and away the ones that are in the deepest trouble.

That's Daryll Ray, director of Agricultural Policy Analysis at the University of Tennessee. Pork producers saw demand fall due to misconceptions about the swine flu. And with consumers pinched by the recession, they've cut back on meat and dairy.

Ray: And there's been a demand reduction, especially for cheese internationally, and therefore, they've been in a real squeeze.

Ray says these developments could benefit consumers at grocery store.

Ray: Pork will continue to be a good bargain and probably decline somewhat.

Though lower prices may not last. Again Bill Lapp.

Lapp: I think what we're in the midst now is a temporary phenomenon where we have this moderation in prices.

He says livestock farmers have reacted to high feed prices by raising fewer cows, hogs and chickens. And that could make meat and eggs more expensive.

Lapp: We will see higher prices at the consumer level, probably more in 2010 than 2009.

Bottom line: Stock up on cheap bacon while you can.

I'm Jeff Tyler for Marketplace.

Follow Jeff Tyler at @JeffMarketplace