Hard year yields good ag receipts in Kentucky

LOUISVILLE — While other parts of the economy are suffering, Kentucky farms are seeing record gross receipts this year despite a difficult year for some of the state's traditional income drivers — horses and cattle.

Despite significant drops in some areas, farm cash receipts are predicted to be a record $4.7 billion for 2008, according to the University of Kentucky agricultural economists who presented their annual forecast Thursday at the Kentucky Farm Bureau convention.

Receipts this year are expected to be up 7 percent from 2007, and up by more than a third from 2001. Next year, receipts from sales of farm products are expected to drop only slightly, to about $4.6 billion.

Even with higher fuel, feed and fertilizer costs, net farm income for many farms is expected to be up about 10 percent for 2008, thanks to growth from corn, wheat, soybeans and tobacco.

But many of the same factors that weigh heavily elsewhere in the economy are problematic for farmers, too.

Lee Meyer, UK agricultural economist, said key concerns for Kentucky farmers include access to credit and the rise and fall of the U.S. dollar. He said that almost a fifth of Kentucky's farm income is from exports, so the lower dollar helped many growers.

The loss of off-farm jobs also is particularly worrisome, Meyer said, because three-fourths of Kentucky farms depend on those jobs for 50 percent or more of their income.

And the rosy macro picture might look more like red ink to many farmers on the micro level.

Hampton "Hoppy" Henton, a Versailles farmer, said some were smart enough to lock in at great prices for their commodities in the spring, but most people are like him and weren't so lucky. Many are probably looking at lowered yields because of the late-season drought and high input costs.

"Those farmers are hurting badly at the end of the marketing year," Henton said.

In hindsight, "when you look at the '08 crop year, you'll discover it was a pretty crappy year, especially when we had such high expectations," Henton said. "I would suggest farmers in general looking at '09 are very, very cautious. ... Because of the exuberance of the spring and summer, the highs looked so high ... and the lows will look even lower."

Cattle, a traditional mainstay of the state's farm economy, were hurt by the back-to-back drought years and by falling demand for U.S. beef as the economy sank into recession.

Horses, often seen as Kentucky's top agricultural export, also have been significantly hurt by the downturn in the world's economy.

The bright spots for Kentucky include tobacco receipts, up 13 percent; soybeans, up 40 percent; corn, up 50 percent; and wheat, up 300 percent thanks to record prices.

Tobacco, traditionally Kentucky's major cash crop, has dropped in overall economic significance behind corn and soybeans. But the leaf crop still matters. Tobacco economics expert Will Snell said that although burley production has dropped, interest in dark tobacco has surged.

"The growth is coming from the dark side," Snell said, which now accounts for about a third of the total value of tobacco production in Kentucky. Dark tobacco is used in smokeless products, such as snuff, that have been increasing in popularity for the last 20 years.

Non-traditional crops, including flowers, fruit, grapes, produce and nursery plants, have seen solid growth in the last few years. The horticulture sector is predicted to see record receipts of $33.7 million this year, with by far the largest produce sales ever seen in Kentucky, UK horticulture economist Tim Woods said.

Nursery, greenhouse and sod producers have probably been affected more than any other farm sector by the downturn in the housing market, Woods said.

"We've got a lot of trees that are still in the ground out there looking for a home," Woods said. "Even places like the big garden centers have been hit hard, seeing a real slowdown in that nursery/garden center-type activity."

Ag economists said they foresee revenue in 2009 being on par with 2008.

"We're looking for net farm income in the next year to be fairly flat," Meyer said. "There's a lot of uncertainty out there, but compared to recent history, we've still had very strong net farm income."

LOUISVILLE — Gov. Steve Beshear told the Kentucky Farm Bureau convention that he plans to continue the 50 percent commitment of tobacco settlement to farm projects despite the state's $456 million budget shortfall.

Beshear said that the $209 million spent through the Kentucky Agricultural Development Board since 2000 has been a crucial long-term investment in the farm sector, which he called "the backbone of our economy."

Janet Patton