GRAIN farmers in the US are expecting higher incomes this year despite one of the country's worst droughts.

Economists from three regional Federal Reserve Banks in the US are predicting some in the farm sector to post record incomes this year.

Grain growers will cash in on the country's crop insurance scheme despite some reporting extremely poor crops.

But farmers producing dairy, cattle and pigs are forecast to earn less due to rising feed and fuel costs.

Bankers surveyed by the Federal Reserve Bank of St Louis described the country's crop insurance, which is a public-private partnership between the US government and the private insurance companies, as a "saving grace".

One Illinois banker said: "farmers with crop insurance might make more money per acre than last year. Livestock farmers that need to purchase most of their feed will be hurt the most by this year's drought".

The Federal Reserve Bank of Kansas City noted of the bankers it surveyed many expected high crop prices and crop insurance to support crop incomes but also that corn and soybean incomes have fallen below last year's highs due to rising fuel costs and reduced yields.

All three banks noted despite the worst drought in 50 years the appetite for farm land continued with values rising.

While the price rises weren't as great as in the past, they continued to climb with the Federal Reserve Bank of Chicago stating in its recent AgLetter demand from farmers and non-farm investors was tipped to continue in the near future.

Recently in Australia the National Rural Advisory Committee concluded that a similar crop insurance scheme wouldn't be viable.