However, rising farm costs have resulted in a downward revision to 2008-09 farm incomes estimates, according to the National Australia Bank.

The net value of farm income (after costs have been deducted) is forecast to increase by 48pc in 2008-09 to around $6 billion — 18pc below NAB's previous estimate — due to a significant upward adjustment to farm cost estimates for 2008-09.

Reflecting this rapid increase in farm costs, relative to commodity prices, the farmers' terms of trade index (the ratio of prices received to prices paid) is forecast to fall to 83 in 2008-09, down from 95 in 2007-08.

Total farm costs are expected to increase by 6pc to $38.4 billion in 2008-09, as high global oil prices and rising global demand for chemicals and fertiliser places upward pressure on key agricultural input prices.

Over the past five years, cash costs for fertiliser, fuel and chemicals accounted for 19pc of total farm costs; however, in 2008-09 this figure is forecast to jump to 27pc of total farm costs with:

?? fertiliser costs: up 34pc to $4.3 billion;

?? fuel and lubricant: up 26pc to $3.9B; and

?? chemicals: up 16pc to $2.2B.