The soaring cost of fuel and fertilizer carved deep into farmers' profits in 2005, and some worry the cuts may go even deeper in the new year.

"We may be looking at a 40 to 50 percent reduction in net farm income just as a result of high fuel costs," Agriculture Commissioner Roger Johnson said. "I think we're going to see some farmers go out of business. You've got to make money."

Good prices for wheat and record or near-record cattle prices helped farmers make money this year. But the state suffered the second-largest scab disease-related loss in wheat and barley since 1997, and the worst outbreak of cattle anthrax in history.

The North Dakota Wheat Commission lost an appeal to a North American Free Trade Agreement panel over Canadian spring wheat tariffs, clearing the way for the federal government to lift the tariffs in 2006 and once again give Canada free access to U.S. markets.

"Obviously, that's another factor that's going to play into spring wheat trends," said Jim Peterson, marketing director for the North Dakota Wheat Commission.

Production of hard red spring wheat, North Dakota's main crop, was down 8 percent from the previous year. Production of all wheat dropped 1 percent because of lower average yields caused by disease and more heat stress on spring wheat.

Peterson said he expects wheat production to drop again in 2006. Producers instead may turn to flax, peas, lentils or other crops that require less fertilizer, he said.

"I think in some of those areas where ethanol plants are coming in or biodiesel plants, that's going to give a little bit of a boost to canola or soybeans or corn," Peterson said.

New ethanol plants are being developed at Richardton and Underwood to make fuel from corn, and biodiesel plants at Minot and Velva will make fuel from canola.

The plant at Minot stumbled when European investors backed out, and the North Dakota Farmers Union is now spearheading the project. Farmers Union President Robert Carlson said the goal is to break ground in the spring.

"We believe we will be the only plant using European standards for biodiesel, which is considerably more demanding in terms of quality," Carlson said. "There is almost overwhelming demand for the finished biodiesel product."

Johnson said he expects plans for even more fuel plants to be announced in the near future. He said the developing industry is good for the state, but not necessarily a cure-all for farmers' woes.

"It's important for us to look at that sort of from a big-picture perspective," he said. "In North Dakota, currently only about 10 percent of our corn crop is turned into ethanol. You still have 90 percent that doesn't have that price boost that comes having a plant in your area."

North Dakota had a record corn crop this year of 141 million bushels, up 17 percent from last year. Some producers had success with the crop even in the northern part of the state, which is not a traditional corn-growing region. But prices for corn have been down, Johnson said.

Cattle prices this year were the opposite, bringing ranchers strong returns. North Dakota Stockmen's Association President Melvin Leland said that was not the only good news, especially for ranchers in the southwestern part of the state who have been dealing with drought for years.

"Much of the areas that traditionally have been dry got really good moisture this year," he said.

"One year usually doesn't fully heal an area. It takes several years for vegetation to come back," Leland said. "I wouldn't say it's totally healed, but it's certainly much better than it has been."

Plentiful fall moisture also should be a boon come spring, he said.

Debate already has begun over the shape of the next federal farm bill in 2007. Many farmers are worried about world trade talks that might result in fewer government subsidies. And fuel and fertilizer prices remain high.

Mark Wagner, 34, who raises wheat, soybeans and cattle in Dickey County, refuses to be negative.

"It's affecting me, but it's not going to break me," Wagner said of the higher fuel costs.

"I'm an optimist, and I'm just going to deal with it," he said. "It isn't going to be easy, but nothing ever is. I'm thankful I can do what I do."