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Kentucky's agriculture economy looking up, experts say

LOUISVILLE — Defying drought, a moribund equine market and a rough national economy, Kentucky's agriculture economic picture is rosy.

Farm cash receipts are expected to be up as much as $300 million this year, to a possible $4.7 billion, and could jump an additional $500 million in 2011 into record territory, University of Kentucky farm economists said Thursday.

"Given robust exports and favorable weather, we think $5 billion in cash receipts is completely reasonable," UK agricultural economist Craig Infanger said at the annual forecast at the Kentucky Farm Bureau convention.

The big driver in the booming agriculture economy is the export market, which has been boosted by the low exchange rate for the dollar.

Infanger said 40 percent to 60 percent of Kentucky's farm income comes directly from international markets, making the state export-dependent, particularly for grains, horses and poultry.

Consequently, the economists said farmers will need to watch more than the skies to plan for the next few years. Everything from potential military action against South Korea, which is one of the top markets for U.S. exports, to the World Health Organization's recommendations against flavorings and additives in tobacco products could affect Kentucky farm income.

Lee Meyer, a UK livestock economist, said that demand outside the United States for chicken and pork will drive up prices on grain as well as livestock. "As incomes go up in India and China — those countries eat negligible amounts of meat now — they are going to eat more," Meyer said.

The gains come as the national agriculture sector has bounced back from the 2009 recession: The U.S. Department of Agriculture predicted this week that net farm income would increase 31 percent, to $82 billion.

Net farm income for Kentucky is predicted to be about $1.3 billion in 2010, up from $1.06 billion last year.

Kentucky trails the national trend largely because horse sales and breeding, which are more dependent on discretionary spending, have not rebounded.

Horses are "a fifth of cash receipts, and it's barely budged off its low," Infanger said.

Last year, horses were surpassed by poultry as the state's biggest agriculture economic commodity. That trend will continue, with poultry predicted to top $1 billion in receipts in 2011.

And next year, for the first time, corn also could pass horses. Given good weather, cash receipts from corn could surge an additional $200 million.

Infanger said the changes show that Kentucky agriculture "is dynamic. It can change, adapt."

The Kentucky agriculture picture has shifted significantly from the 1990s, when tobacco dominated the landscape, followed by cattle.

UK tobacco expert Will Snell said Thursday that the key question now is, "Have we seen the last $300 million tobacco crop?"

In the 1990s, the crop topped $900 million in receipts, but with the 2004 buyout of the federal price support program, many farmers stopped growing it.

For those that remain, Snell said, the market has been challenging, particularly this year, when drought hurt the crop. He said cigarette makers are rejecting or downgrading a lot of tobacco brought in by contract growers.

But Roger Quarles, president of the Burley Tobacco Growers Cooperative Association, said the crop still has significance for many Kentucky farmers. "There are still plenty of opportunities for tobacco," Quarles said.

"Tobacco still ranks as one of the most profitable crops in Kentucky."

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