It is hard to overstate the importance of the Thoroughbred industry in Central Kentucky. It's not just a major economic force, it's our identity.

So, no one can take lightly the news that the crop of Thoroughbred foals born next year will likely be the smallest in four decades.

Fewer Thoroughbreds affects a wide range of people, from grooms to veterinarians to feed suppliers to auctioneers to fence builders. It's a blow to our local economy, no question.

It's not a fatal blow, though, to either the Thoroughbred industry or the economy.

The challenge is to sort out where we go from here.

The foal crop, estimated at 24,700 next year, down from 27,000 this year isn't going to zoom back up to the 40,000-plus of 20 years ago.

Despite the decline, Central Kentucky remains the center of Thoroughbred breeding in the United States. In 2010, according to Jockey Club figures, Kentucky led in mares bred with 17,109, compared to 3,292 in the No. 2 state, Louisiana.

As for stallions, there were 284 in Kentucky and they were bred to an average of 60.2 mares, while in Louisiana 264 stallions were bred an average of 12.5 times. It's not even close. And that doesn't include average stud fees which, no doubt, are much higher for the quality stallions that stand in Kentucky.

But the reality is that fewer acres of Bluegrass farmland will be used for growing Thoroughbred horses in the future.

That leaves this important public policy question: What will grow there?

If, as residents here have said over and over, we don't want our farmland to grow subdivisions and strip malls, then we've got to plan for a more diversified agriculture future.

There is probably more diversity even now than many people realize, including a significant cattle industry. Kentucky is the largest cattle-producing state east of the Mississippi River. In recent years, particularly as tobacco has declined as a cash crop, more farmers have shifted to producing fruits and vegetables for market, and vineyards have sprung up.

"The more value-added opportunities we can give farmers the better," says Knox van Nagell, executive director of the Fayette Alliance, a land-use advocacy organization.

That will require re-ordering economic-development thinking so that promoting agriculture is on the same level as attracting other businesses. What infrastructure, financing, educational and other resources will support a diversified agricultural sector? Can equine tourism be expanded to include agri-tourism?

These are challenging times in so many sectors, including the Thoroughbred industry. They can't be met by hunkering down until the next upswing.

Central Kentucky is blessed with world-class soils and a world-class landscape, moderate climate, easy access to millions of consumers and a long history of agriculture.

Our challenge is to chart a future that will leverage those assets into a sustainable, diversified agricultural economy.