A new government projection that U.S. net farm income will plummet nearly 27 percent in 2014 is a clear signal that farmers are likely headed into a period of tight margins and difficult management decisions, according to Dave Miller, director of research and commodity services for the Iowa Farm Bureau Federation.

"We are moving into a period of adjustments that we haven’t seen for a while," said Miller, who also farms in Lucas and Clarke counties. "There is really going to be a crunch on operational margins this year because expenses won’t adjust down as fast as income has, and it’s hard to know how long it will last."

The new projection, issued last week by the U.S. Department of...