When escalating feed costs threatened its bottom line, Thomas Poultry Farm changed its chicken-feed formula.

The Saratoga County, New York, farm had to do something to reduce the cost of producing 56,000 pounds of feed each day for more than 200,000 chickens after the price of corn nearly tripled.

“When things tighten up, you’ve got to be creative and find ways to make feed at a cheaper cost,” said Jennifer Thomas, who runs the farm with her husband Brian Thomas and brother Ken Bean.

Now, the Thomases are facing a bigger problem that has gripped poultry, dairy, and crop farmers across the country—the recession.

Farmers are fighting to save their business in what economists are calling the worst agriculture downturn in 50 years.

The economy has caused consumers to scale back on their grocery bills, a move that has slashed egg and dairy prices and decimated farm income. U.S. farm income is forecast to fall 38 percent this year to $54 billion, according to the U.S. Department of Agriculture. Farmers are being forced to borrow money just to pay their bills, and they’re burning through equity that took years to build up.

A growing number of farmers are in danger of losing their business with more upstate New York farmers filing for bankruptcy protection during the first nine months of 2009 than in the two previous years combined.

“It’s terrible,” said Bob Smith, senior vice president at First Pioneer Farm Credit in Cobleskill, New York. “Nearly all farm sectors have been hurt by the recession.”

Wholesale milk prices are so low that dairy farmers lose 50 cents or more for every gallon of milk they sell. New York dairy farm production costs have been running between $17 and $18 for 100 pounds of milk. Since February, farmers have been getting paid between $11 and $12 for 100 pounds (roughly 12 gallons), according to the USDA.

“If dairy farms are going to continue to function, you’ve got to borrow money to get through it,” said Brian Ziehm, who owns Tiashoke Farms with his two brothers.

Tiashoke, a 900-acre farm, has 500 working cows and a replacement herd of 500. Revenue was $3.5 million last year, but Ziehm expects it to fall about 30 percent this year.

“It’s not like running a factory, where you can put 100 guys out of work until the economy recovers,” he said. “We can’t tell 200 cows to stop eating.”

Farm lenders say the combination of low milk prices and a decrease in global and domestic demand has forced dairy farmers to burn through their equity and sell unproductive assets to survive.

In July, dairy farm loan volume in New York grew $171 million, to $934.4 million, compared to the same time last year, according to data for First Pioneer Farm Credit, Farm Credit of Western New York, and Yankee Farm Credit. The new loan demand is a direct response to the decline in income. Dairy farm income in New York is projected to shrink by $707 million, to $1.65 billion, this year if current milk prices continue.