Kentucky farm receipts top $5 billion for first time

LOUISVILLE — While the rest of the economy flounders, Kentucky's farm economy is growing by leaps and bounds. Farm cash receipts in 2011 will top $5 billion for the first time ever, University of Kentucky agriculture economists said.

Their annual forecast, released Thursday at the Kentucky Farm Bureau's annual convention, predicted combined crop and livestock receipts of about $5.2 billion to $5.4 billion, up by as much as $1 billion from last year's record $4.4 billion.

Increased demand worldwide for grain, particularly in China, is driving the price surge.

Although poultry has been the leading Kentucky farm commodity for the past few years, corn is charging up to rival it this year, said Will Snell, a UK economist. Both are likely to be about 19 percent of total farm sales.

Beef cattle and horses, both stronger this year, will be close behind poultry and corn at 14 percent each, followed by soybeans at 12 percent, other farm commodities such as fruits and vegetables at 11 percent, tobacco at 8 percent, and dairy at 5 percent.

Next year, farm receipts are expected to surge even higher, to $5.3 billion to $5.7 billion.

"This is a banner year in agriculture," said Mark Haney, Kentucky Farm Bureau president. "How can you not be excited about agriculture with the future we have and the results we've had this year?"

National net farm income is reaching record levels, and in Kentucky, it is expected to top $1 billion this year. That won't beat 2005, which was the first year of the federal tobacco buyout, but it will be in the top five years, Snell said.

Across the board, all sectors of farm sales, including tobacco, saw some improvement this year. But higher feed, fuel, fertilizer and employment costs ate into income.

Farm leaders on Thursday expressed concerns that the record prices, particularly for corn, could have detrimental effects down the road as farmers switch acreage from other crops.

That is driving up land prices and rent costs in some areas.

"Is there a bubble; could it turn? Absolutely," said Cory Walters, a UK grains expert.

Agriculture Commissioner-elect James Comer cautioned farmers to make careful investment decisions.

"We need to make sure our farmers are not over-leveraged," Comer said. "We're in uncharted territory for every commodity."

This year's farm economy is a far different one from a decade ago, when tobacco and horses far outweighed all others, said Scott Smith, UK agriculture dean.

He said that he does not expect one crop to be that dominant again, thanks in part to the diversification fostered by the Governor's Office of Agricultural Policy and the state Department of Agriculture's emphasis on a wider variety of crops in the post-tobacco landscape.

"The buyout worked," Smith said. "We've basically succeeded in diversifying. We thought there was some magic (crop) — hemp, aquaculture — but no one crop will dominate from now on."

The end of the federal tobacco price support program also dramatically altered which Kentucky farms make money: Snell said that farms in the western half of the state have seen 32 percent growth, while those in the east have lost 30 percent of their cash receipts.

Snell said farm leaders are looking for new opportunities, but it will be tough to replace tobacco as a source of income. Cattle, goats and horticulture all have some room to grow, he said.

Timber, which is not tracked by the U.S. Department of Agriculture, is a valuable source of farm income in Eastern Kentucky, he said.

"Difficult question on Eastern Kentucky," Snell said. "Pockets of agriculture remain strong. ... That picture concerns me a lot. I'm amazed at the losses we've seen. I don't think tobacco will be part of that future."