LOUISVILLE — Despite a drought that cut corn yields in half this year, Kentucky farms are expected to have record income of more than $5 billion for the first time.
University of Kentucky agriculture economists announced the good news at the annual forecast at the Kentucky Farm Bureau convention.
"The drought dominated talk on farm economy this summer," UK economist Will Snell said. "It seemed like every night, we'd see some reporter out in the Midwest talking about how it would impact yield, cattle herds.
"... What will be surprising to many people is that despite one of the worst droughts ever, the USDA is projecting net farm income will remain near record-high levels."
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In Kentucky, Snell said, economists are forecasting $5.3 billion in farm cash receipts for 2012. Next year, the total could reach $5.4 billion to $5.6 billion.
The main driver is corn, which will challenge poultry as Kentucky's top commodity despite the loss of half the crop to dry, hot weather. The losses were offset by more acres planted in corn and by record prices.
Another mitigating factor: crop insurance.
Cory Walters, UK grain economist, said crop insurance saved Kentucky farmers. Payments are expected to be $200 million to $250 million to Kentuckians for corn losses alone, he said.
Almost all other sectors of Kentucky agriculture — including cattle, horses, tobacco and horticulture — showed improvement in 2012 with the possibility of more in 2013, the experts said.
One exception: dairy, which remains troubled.
Snell said Kentucky has benefited from strong exports, with nearly half of all income coming from international sales.
"The growth in exports has been pretty much across the board and is very, very favorable for livestock," he said.
Snell said one surprise had been the major rebound in tobacco. A year ago, Snell asked whether Kentucky had perhaps seen its final $300 million crop; instead, he said, a worldwide shortage, combined with a terrific Kentucky crop, has the state moving in the other direction.
"I think, on paper at least, we have a chance at a $400 million crop next year," he said.
Another sector that has seen remarkable growth has been horticulture, which had a record $121 million in sales of nursery plants, vegetables and fruits.
Tim Woods, UK horticulture economy expert, said interest in everything from vegetable auctions to direct sales to restaurants is booming.
"Lot of new producers are getting into agriculture, even if it is only part-time," Woods said.
If housing starts rebound as anticipated, Kentucky's horticulture and forestry industries could expect big gains next year.
Forestry expert Jeff Stringer said that in 2013, if housing starts continue to trend up, "that indicates an improved market for lumber, flooring and cabinets."