Editor’s Note: The following report by Tim Thornberry, about the University of Kentucky College of Agriculture’s Agricultural Outlook meeting held as part of the Kentucky Farm Bureau Federation annual meeting, provides insight into an ag economy for the state that is quite similar to reports by ag economists in most states of the nation, especially those Corn Belt states that fought the drought battle in 2012. The report appeared on kyforward.com.
Remember that unofficial creed of the Postal Service? “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”
The idea may be better suited for the agricultural industry these days, at least in Kentucky. “Neither bad economy nor record heat and drought nor fiscal cliffs nor lack of a farm bill can keep our farm economy from reaching record levels!”
That is perhaps a fair summary of the University of Kentucky College of Agriculture’s Agricultural Outlook meeting held during the annual Kentucky Farm Bureau Federation Meeting.
Despite interference from the weather and the economy, and distractions from Washington, the state’s ag industry has proven to be sustainable even in the worst of conditions and a force to be reckoned with when it comes to other Kentucky industry sectors.
The news of anticipated record agricultural cash receipts came as no real surprise to those in or those who follow farming and it mirrored what was said at last year’s gathering. Granted the 2011 estimate of a $5 billion year fell just short when the final numbers were released last summer, although it still was in record territory.
But this year’s numbers through September are a solid 10 percent high than in 2011 during the same time period.
The news came by way of a group of ag economists from UK all with one consistent message, agriculture in Kentucky is strong even with many variables to consider.
Will Snell kicked off the proceedings by surveying the overall state and national conditions and outlook. He said while the country experienced and is still experiencing one of the worst droughts in U.S. history, the USDA projected net farm income would remain near record high levels.
“Yields were down but this was offset somewhat by higher crop acres and, obviously what’s driving the revenue part of the farm income equation has been prices; crop prices at all-time record levels and relatively strong livestock prices,” Snell said. “As a result, we’re looking at an all-time high level of gross farm income on the national level for 2012.”
One driving factor that cannot be ignored is the amount of crop insurance paid out as a result of the devastating drought. That number so far this year has reached about $6 billion nationally and could go as high as $20 billion once all the payments have been made, added Snell.
In the midst of talks concerning a farm bill, crop insurance is one of those things regulated by the bill and has been a topic of debate in getting the legislation passed. One thing most in the ag industry will agree upon however, this year was a model in demonstrating the need for a safety net in the event of natural disasters that interrupt production.
In Kentucky though corn yields will likely be half of what they were last year, the crop shared the top spot on the breakdown list of which commodities supplied what percentage of that $5.3 billion. Both corn and poultry will represent 18 percent each of total projected receipts.
Soybeans and horses are close with 14 percent each while cattle will stand at 13 percent. Tobacco will weigh in at seven percent with dairy totaling four percent of the money pie. The remaining 12 percent is listed as “other.”
A large portion of the “other” category and now a force all its own is that of the horticulture sector. UK’s Tim Woods said it’s a sector that continues to see growth.
“In its own way (horticulture) has been responding to a lot of efforts that we’ve put in the state to try and encourage diversification particularly on the produce side,” he said. “Despite some impacts from the recession, we’re still looking at a pretty strong year with a number of different factors contributing to it but mostly things have gone well for the annual vegetable folks.”
Woods also said overall more producers are involved in the markets while more markets channels are beginning to grow. He added that the local food movement has been a big contributor to the growth experienced by produce growers and the demand so far especially in larger cities is greater than the supply.
Another interesting point made during the meeting related to tobacco. The UK report indicated that tobacco is still a driving force in the crop arena. Burley and dark tobacco crops could generate as much as $400 million in 2012, the highest numbers experienced in the post tobacco quota buy-out era, said Snell. But despite an upswing in the sector, the biggest issue for tobacco producers remains the lack of a labor force, something that could affect the number of growers for the 2013 growing season.
“We saw more (growers) come back this year and I think some of it was economy related, but I think some of those guys were challenged because they tried to utilize local labor,” he said. “I still think they are going to find it difficult to remain in this market unless they invest in infrastructure and they go the H2A route.”
H2A is the government program used to bring nonimmigrant foreign workers into the country and place them in areas that need seasonal farm labor. For some however, Snell said that tobacco may be a side business for them as long as there is a market for the product.
As part of the UK team’s assessment of current year production, they also looked ahead to 2013. The news looks even better with early estimates placing next year’s cash receipts at yet another record level of $5.4 billion to $5.6 billion.