RICHMOND -- The state Agriculture Department's chief economist is predicting an increase in net farm income this year if Virginia escapes another drought.

Dr. Berkwood M. Farmer said recently that improved prices, a strong beef market, and a return to normal crop yields should result in a healthy 8 percent increase in net farm income next year -- unless drought strikes for a third summer.

"I can't recall when we've had three in a row," Farmer said. "But we can't forecast the weather."

Farmer said lower production costs and record government payments increased the state's net farm income last year, despite weak agricultural sales and a summer drought.

The state's farm income was about $2.07 billion last year -- an increase of $8 million from 1986, but about $80 million less what it might have been without a drought, Farmer said in his annual report to the State Board of Agriculture and Consumer Services.

He said the drought and continued low grain prices forced cash crop receipts to their lowest level in at least a decade.

He estimated net farm income at $487 million, up $78 million from 1986 -- a 19 percent increase. The figures, however, were skewed by the inclusion for the first time of about $50 million in horse sales in federal agriculture statistics, he said.

"Agriculture in Virginia as a whole did not fare well," Farmer said. "The crop sector is hurting and poultry is going down.

"If in '87 we were to ignore the record high government payments and the gains in the beef and hog sectors, then 1987 was a below-average year for Virginia agriculture."

Government payments of $85 million last year are almost double those farmers received in 1986, but they will decline this year.