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Economists see a second strong year for Kentucky
Kentucky Correspondent

LEXINGTON, Ky. — As Kentucky farmers say goodbye to 2006, they look back on a year that saw farm cash receipts reach $4.1 billion, the second highest on record and better years could be ahead according to predictions for the new year.

University of Kentucky (UK) Extension economic specialists released their 2007 outlook for state agriculture, and they expect producers could share nearly $4.3 billion in cash receipts.

Larry Jones, a UK ag economist, addressed producers during the college’s annual outlook conference at the Kentucky Farm Bureau convention and said the past three years in Kentucky agriculture have been good ones.

“The (USDA’s) Economic Research Service has a quote on its website saying 2004-05 were unprecedented in our history; and in Kentucky, I think we can safely add 2006 as well,” he said.

If the forecast holds, assuming normal growing conditions and no major disease outbreaks, next year’s receipts will break the old record of $4.13 billion set in 2004.

The news pleased Kentucky Ag Commissioner Richie Farmer, who said the state’s agricultural strength is due, in part, to the combined efforts of many factions.

“The state of agriculture in Kentucky is strong,” Farmer said. “But almost as important as the strong financial numbers is a spirit of teamwork and optimism that I see throughout Kentucky. Government is working with private enterprise and the universities. Commodity groups are looking for common ground. And leaders of both political parties are making commitments to strengthen the foundations of Kentucky’s agricultural economy.”

The report said last year’s numbers were led by livestock receipts, representing $2.785 billion or 61 percent of the total, thanks to continued strong market prices.

Crop cash receipts were 4.4 percent more than 2005 - totaling $1.326 billion. Row crops led by corn, soybeans and wheat saw increases, while hay and vegetables declined slightly. Tobacco numbers fell again to $320 million; however, last year’s totals included 2004, pre-buyout tobacco.

The equine industry continues to stand at the top of commodity receipts list, exceeding $1 billion for the second year in a row.

Net dollars for 2006 are expected to decline during the 2005 record of $2.082 billion due to lower government transfer payments and increased production costs.

While livestock has led the way during the past few years, the economists think 2007 will see an increase of 13 percent for crops because of significantly stronger row crop prices.

UK Tobacco Economist Will Snell wrote in the report that even with disease and weather problems, this year’s tobacco prices will likely increase on last year’s but uncertainties remain.

“Despite some quality concerns on the later-produced tobacco, contract price schedules indicate that burley prices for the 2006 crop should be higher than what was observed for the first post-buyout crop in 2005,” reported Snell.

The 2007 outlook for burley is one of likely decline without more tobacco company price incentives and with continued increases in production and labor issues, but Snell still sees reasons for optimism.

“While the future for those remaining in the sector remains very uncertain, production and cash receipts for the Kentucky tobacco sector does have the potential to expand in future years (in response to demand opportunities) if growers are encouraged (through manufacturer price incentives) to remain in production, and most importantly, the labor situation shows some signs of stabilizing or improving,” he wrote.

Corn growers are expected to see increased U.S. consumption of record proportion for the fourth consecutive year according to Steve Riggins, UK Extension grain marketing specialist. Riggins reported that the use of corn to produce energy and the “projected magnitude of further corn use for ethanol and soybean oil for bio-diesel use has produced a dramatic rally in corn prices since mid-September” after which soybeans saw a rally in prices as well.

The outlook report projects a less than 1 percent increase in livestock receipts for 2007 with high feed costs and increased marketings in the drought-stricken western part of the state expected to result in lower cattle prices. Increased production and trade questions will create a drop in hog prices while broiler prices are expected to stay about the same.

State goat producers who participate in the Kentucky Department of Agriculture’s graded and Tel-O-Auction sales “can expect very competitive prices,” the report said.

Produce sales increased slightly in 2006 and are expected to increase in 2007 as direct marketing continues to grow.

More than 1,800 vendors participated in farmers’ markets in 2006 with those numbers increasing yearly. As far as commercial produce is concerned.

“Kentucky posted the second highest rate of growth (53 percent) in vegetables acres harvested among U.S. states between 1997 and 2002,” according to the report.

Dairy producers saw a decline in prices in 2006 with the number of dairy cows on the decline as well. The USDA predicts a slight increase in milk production for next year, which will keep prices low. Commissioner Farmer said that this year’s information and the outlook for next year show state diversification efforts are paying off.

“The 2006 results and 2007 forecast show that Kentucky is succeeding in diversifying its agricultural industry,” Farmer said. “The investments of tobacco settlement funds and the Kentucky Proud marketing program are working.”

This farm news was published in the Dec. 13, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.