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* High commodity prices mean record U.S. farm income in 2013
* Farm exports to reach record $145 billion this year
* Big corn, soy crops will lower prices sharply this fall
* High production costs to slash farm income 32 pct in 2014
WASHINGTON, Feb 11 (Reuters) - The seven-year-old U.S. agricultural boom, driven by record-high commodity prices and painfully tight supplies, is expected to peak this year and then come to an abrupt end as high costs start to bite, the government projected on Monday.
The U.S. Agriculture Department said farm income would soar to a record $127.6 billion this year, up 15 percent, thanks to high market prices and crop insurance payments that will offset losses from the worst drought in more than half a century.
Farm income would fall by one-third next year, to $96.9 billion, said USDA, because corn, wheat and soybeans - the three most widely grown crops - will fetch dramatically lower prices with bumper crops expected this fall.
The abrupt contraction in farm income could prompt operators to slow purchases of equipment such as trucks, tractors and combines, structures such as grain bins, or crop land. Land prices soared along with grain prices since 2006.
High production costs, up 12 percent in two years, will compound the effect of lower earnings for crop farmers. But lower prices for grains and oilseeds will be a welcome relief for livestock producers who have complained of ruinously high prices for feed for cattle, hogs and poultry.
"While income declines from the 2013 record through 2015, it remains well above the average of the previous decade," said USDA in a battery of projections for farm output, income and exports this year.
The projections were based on conditions at the end of 2012 and will be updated at USDA's annual Outlook Forum at the end of the month.
U.S. farm exports are projected at a record $145 billion this fiscal year, which ends on Sept 30, up $10 billion from the previous year. USDA said the record "largely reflects high commodity prices."
Agricultural exports would drop by $3 billion in fiscal 2014, it said, and by an additional $5 billion in fiscal 2015.
Assuming yields return to normal this year, farmers will harvest a record 14.4 billion bushels of corn, up 34 percent from last year; the second-largest soybean crop on record at 3.335 billion bushels; and a medium-sized wheat crop of 2.19 billion bushels, said USDA.
Market prices would plunge this fall as a result, said USDA. It projected corn would sell for an average $5.40 a bushel at the farm-gate, down nearly $2 from the record-high season-average price forecast for this year.
Soybean prices would be nearly $3 below the record $14.30 a bushel expected this year. Wheat would be down by 70 cents from the record $7.90 a bushel forecast for this marketing year.
"Nonetheless, U.S. prices for corn, wheat, and soybeans are projected to remain historically high, above pre-2007 levels," USDA said.
Growers were projected to plant 254 million acres - second only to the record set in 2012 - of the eight major U.S. crops, wheat, rice, corn, sorghum, barley, oats, soybeans and upland cotton this year, said USDA.
With drought persisting in the U.S. Plains and western Corn Belt, there was high concern about likely yields. The winter wheat crop, grown mostly in the Plains, was most at risk from drought. USDA projected lower yields for wheat and a e percent smaller crop this year than in 2012 despite larger wheat area.
USDA devoted three pages, out of the 105 pages in its annual projections, to explaining the methodology behind its projections of yields. Its corn formula looked at 25 years of crops, including the 1988 and 2012 droughts.
USDA's projected corn yield was higher than other forecasts. A Kansas State University economist, Dan O'Brien, used 157.4 bushels an acre as the likely yield in a forecast last month. David Anderson, agricultural economist at Texas A&M, has used 150 bushels an acre as a reasonable yield that would produce a record crop.
Many analysts believe growers will plant 97 million to 99 million acres of corn, compared to the 96 million acres projected by USDA.
U.S. corn and soybean production has fallen for three years in a row. Traders have focused on bare-bones corn supplies and the need to rebuild stockpiles.
Experts say weather in late summer, when the corn and soybean crops mature, is the greatest determinant of crop size, despite the anxiety about planting crops in a dry seedbed.
USDA's projections are on the Internet at