Due to bad weather and unfavorable foreign exchange rates, Kentucky farm income will fall in 2015 by about $500 million. But at almost $6 billion,this will be the third-highest year on record for state farmers.
University of Kentucky agricultural economists, presenting their annual forecast Thursday at the Kentucky Farm Bureau convention, said the outlook for next year is slightly worse, with gross cash receipts predicted to slip slightly to $5.9 billion.
The 8 percent decline in gross receipts will mean about a 20 percent drop in net farm income, which will dip below $2 billion. Next year, net farm income — profits — will slide even further, to about $1.5 billion, according to UK estimates.
Although bad weather hurt some crops, including burley tobacco, a big drag on farm sales is the decline in exports because of the strong dollar, UK economist Will Snell said.
“Ag always cycles. We have some good years and some challenging years. It does appear that the more we become globally connected, the wider these swings have become,” Snell said. “The question we all have is, how long will this downward spiral continue? We’ve certainly had a very sunny outlook the last few years, … but storm clouds have settled in and we have some challenges.”
Crops were hit harder than livestock: Crop farm gate receipts for 2015 are expected to fall by 16 percent, whereas livestock will slip by 3 percent.
“Record high grain yields and strong spring/summer cattle prices, coupled with solid poultry and equine sector factors, helped partially offset depressed fall cattle and grain prices, as well as falling tobacco revenues,” Snell said.
Another big factor: the end of tobacco buyout payments, which farmers received for 10 years. Now that that program has ended, famers will have $150 million less from “mailbox money.”
Kentucky’s farm receipt outlook is slightly better than the national picture; the USDA forecasts that 2015 receipts will be down 10 percent for the country as a whole.
For 2016, several sectors, including equine, are expected to show improvement. The Thoroughbred industry has been invigorated by American Pharoah’s Triple Crown win, and stud prices are expected to increase next year, according to UK livestock market expert Kenny Burdine.
Poultry and dairy, wheat and hay also are expected to gain ground, while beef cattle, corn and soybeans are expected to be down in 2016, according to the economic forecast.
That wasn’t good news for Gilbert Edgington, who farms about 250 acres in Garrard County. Cattle, corn and tobacco have been the mainstays of his farm, which was hit by heavy rain this year.
“Our tobacco is not going to weigh what it generally does. … Cattle prices are going down,” Edgington said. He said he will cut costs on labor to keep the operation profitable. “Next year, I hope, is better than this one. … I hope it’s a better than break-even year.”
Incoming Agriculture Commissioner Ryan Quarles said he plans to work on new market development, particularly for value-added products and in overseas markets.
“Whenever we can take the raw product from the field or the barn and process it, it’s going to add value to it,” Quarles said. “When we do that, we can slap the Kentucky Proud symbol on it, and it supports the local economy and helps create jobs.”