The prices that farmers receive for their crops and animals fell an average of 1 per cent between mid-August and mid-September, the Agriculture Department reported yesterday.

It was the fourth consecutive monthly decline.

The department's Crop Reporting Board said prices for milk, lettuce and oranges improved, but they were offset by lower prices for soybeans, hogs, potatoes, corn and cotton.

Over-all farm prices, which were at record highs four years ago, dropped 7 per cent below those in September 1976.

Farmers' expenses, including those they share with other workers and consumers, decreased by one-half of one per cent below the Aug. 15 mark but were 4 per cent above a year ago.

Farm prices as a whole are not viewed as especially sensitive indicators of future fomd-price trends. They vary widely each month because of the mix of crops and meats, and middlemen who process, transport and sell the resulting products at retail account for about 60 per cent of the consumers' grocery dollar.

Agriculture Department economists expect retail food prices for 1977 to come out 6 per cent above the 1976 averages, which were 3.1 per cent above 1975.

All the increase is blamed on imported foods and off-the-farm costs and profits.

The farm-price trend does preview the level of spending by the government under price and income-support programs for the 8.3 million persons living on farms.

President Carter signed wide-ranging new legislation for those programs Thursday. Key provisions are expected to boost total farm income this year by less than 10 per cent. Otherwise, the income would have fallen below $20 billion for the first time in five years, and it still may, the Agriculture Department has said.

Last year, U.S. farm income was about $21.9 billion, down from a 1973 record of $29.9 billion. About 65 per cent of the farms have sales of less than $20,000 a year.

The legislation also provides for USDA-directed cutbacks in crop acreage that are aimed at reducing heavy price-drepressing supplies of grains. A wheat set-aside already has been announced and one is expected next month for corn and sorghum farmers.

The Crop Reporting Board's farm-price index has risen for six months, beginning last November, and then began to decline again this summer.

As of Sept. 15, prices for meat animals as a group has fallen 1.5 per cent from mid-August but were 6 per cent above a year earlier.