December 6, 2006 | By: Laura Skillman
LOUISVILLE, Ky.

Kentucky total farm cash receipts are expected to finish the year as the second highest on record and are predicted to reach a record $4.3 billion in 2007.

Larry Jones, agricultural economist with the University of Kentucky College of Agriculture, told farmers during the college’s annual outlook conference at the Kentucky Farm Bureau convention that the past three years in Kentucky agriculture have been good ones.

“The U.S. Department of Agriculture’s Economic Research Service has a quote on its Web site saying 2004-2005 were unprecedented in our history, and in Kentucky I think we can safely add 2006 as well,” he said.

Kentucky’s total farm cash receipts are expected to reach $4.1 billion this year. The strong farm income for the past three years has been the result of the livestock industry, Jones said. Equine, poultry and cattle sales make up 61 percent of the total farm cash receipts. In 2007, livestock receipts are expected to flatten, but grain receipts are expected to see significant increases.

Net farm income – the amount farmers actually put in their pocket – is expected to decline this year from the record $2.08 billion set in 2005. Higher energy costs, interest payments and lower government payments contributed to a lower net income for farmers in 2006 and will do so again in 2007.

“One of the things that allowed us to set a record net farm income in Kentucky last year was government payments, primarily as the result of the tobacco buyout,” Jones said. “We’re not going to set a record in 2006 or 2007, but it’s certainly going to be well above the trend of the last 10 years.” 

In 2006, equine sales are expected to be $1.06 billion, followed by poultry and eggs at $850 million; cattle, $600 million; corn, $381 million; soybeans, $338 million; tobacco $320 million; and dairy, $176 million. The remainder comes from hogs, wheat, hay, horticulture and other crops.

As we move into 2007, Jones said things farmers need to watch for that could impact their income include international trade agreements, the U.S. farm bill debate, energy costs, interest rates, and national and world economic growth.

“All in all, I think we’ve seen some pretty good years as we look at the total agricultural economy,” he said. “2006 and 2007 won’t be as good as it was in 2005, but they are still going to be well above trend.”

Here are some highlights from the various agricultural commodities underscored at the recent agricultural outlook conference.

Corn prices are expected to lead all grains to higher prices in the coming year and are already doing so in the latter months of 2006. Increasing demand from the energy sector along with stable demand for livestock feed are driving corn prices, while the impact corn prices will have on wheat and soybean acres are affecting prices for those commodities, said Steve Riggins, UK grain market specialist.

Consumption of U.S. corn is expected to hit a record 12 billion bushels for 2006 – the fourth consecutive record. This exceeds production by about 1 billion bushels. Demand is outstripping supply, drawing down stocks of corn. Additional acreage will be needed to meet demand or yields need to greatly improve, which isn’t likely to happen in the short term, he said. Where the additional acres will come from is uncertain, but they will likely come from current soybean acres and from some acres that have been set aside through the federal Conservation Reserve Program.

Riggins warned that the strong grain prices are a bubble much like the interest rates and housing bubbles. The question is how long the bubble will last.

Tobacco continues its transition from price supports to free market with about 8,000 farms growing tobacco today, compared to 30,000 prior to the tobacco buyout program. The remaining growers have increased their acreage, and production is shifting westward in the state, said Will Snell, UK tobacco marketing specialist.

Demand for burley tobacco in the past year has been strong. For the past five years, use has exceeded production, forcing companies to draw down stockpiled tobacco. The result is an opportunity for Kentucky’s burley industry to stabilize or even rebound somewhat, he said. 

“The industry is calling for 300 million pounds of burley, but in recent years we’ve only been able to produce about 200-some million pounds so there is a need to grow more tobacco in the future,” he said.

However, lack of available labor has been a problem, especially in the past year. If the labor issue cannot be resolved, farmers may not be able to take advantage of this opportunity, he said.

Kentucky’s horticulture industry continues to grow, with the green (nursery/greenhouse) industry leading the way with $80 million in sales. Fruits and vegetable sales are expected to reach $28 million in 2006 and increase to $30 million in 2007. Interest is also increasing for organic produce.

“In Kentucky a lot of produce sales are driven by direct markets and that’s a really important aspect for a lot of our farmers,” said Tim Woods, UK horticulture marketing specialist. “We had over 1,800 farmers selling in community farmers’ markets and farm direct markets.”

Wineries in Kentucky also continue to grow, from zero in 1993 to 41 in 2006. There are approximately 450 bearing acres of wine grapes in Kentucky and additional planting are going in and there is room for more, he said.

Contact: 

Larry Jones, 859-257-7289, Steve Riggins, 859-257-7256, Will Snell, 859-257-7288, Tim Woods, 859-257-7270