By TIM THORNBERRY
Kentucky Correspondent

LOUISVILLE, Ky. — In the middle of the annual Kentucky Farm Bureau Federation (KFB) conference, University of Kentucky (UK) agriculture experts held their yearly discussion delivering an outlook report for the approaching year and wrapping up 2009.

Coming off a 2008 year that saw record farm cash receipts, the news wasn’t quite as good this year. In fact, those receipts are expected to fall by $550 million, according to the outlook report, and across the nation, the USDA forecasts net farm income to fall 34 percent compared to 2008.

“We can expect Kentucky agriculture to follow the same trend of sharply lower gross receipts for this year,” said Craig Infanger, extension professor in the UK Department of Agricultural Economics. He and fellow UK agricultural economists Kenny Burdine, Will Snell, Cory Walters, Tim Woods and Lee Meyer made the presentation.

Infanger opened the session by saying 2009 may be remembered as the year the recession appeared in the agriculture sector. “Most of the economic news was concerned with what’s been happening with the general economy and Wall Street, but it’s quite clear that the same factors that brought on this rather severe recession are now affecting agriculture,” he said.

“After two years of record high net farm income in U.S. agriculture, well above the 10-year average of $64 billion, the USDA is now predicting for 2009, net farming will be down more than a third.”
Infanger added there are three real general factors behind what has happened in the farm economy. The first is the recession; second is the big plunge in the commodities market; and finally, the drop in the ag export market, which fell off dramatically from $115 billion in 2008 to about $97 billion this year.

In Kentucky, the outlook report estimated that livestock receipts of $2.46 billion declined by $450 million from 2008, a reduction driven by a decline in equine receipts, which came primarily from Thoroughbred sales and stud fees.

“The Thoroughbred industry, which has recently been the largest single part of farm gross receipts in Kentucky, has had a particularly difficult time,” Infanger said. “The global recession has pushed auction sale prices down for two years, with prices being down 30 to 40 percent in recent sales.

“When you combine the reduced income from Thoroughbred sales with lower prices for grain, milk and hogs, the result is lower income on most Kentucky farms this year.”

Crop prices fell from the highs of 2008 as well. Cash receipts declined for corn, wheat, hay, fruits and greenhouse products, according to the summary – but soybean income increased with better yields, and tobacco receipts were up with expanded acreage.
All told, total cash receipts for crop marketing are estimated to be $1.83 billion, 43 percent of total farm cash receipts in Kentucky, compared to just 40 percent last year.

Beef, dairy industries suffered in ’09

Burdine said the “beef cattle numbers are as low as they were in the 1960s, but weak demand has kept prices soft. Calf prices rallied from late 2008 levels but plummeted in the fall, resulting in a price decline of more than $20 per hundredweight from spring to fall. If demand strengthens in the coming year, calf prices should rally into the spring of 2010.”

The dairy industry in the state was hit especially hard. The report noted that Kentucky mailbox prices will likely average around $6 per cwt. below 2008 levels. The USDA accounted for 86,000 dairy cows in Kentucky at the start of 2009, but the expectation is that number will be lower at the start of 2010.

Burdine expects the lower herd numbers, coupled with improvement in dairy stocks, should result in mailbox prices above 2009 levels by $2-$4 per cwt.

Meyer said the sheep and goat industry in the state remained relatively stable, but hog production fell and prices dropped, thanks to less demand and concerns the public has over the H1N1 flu virus. Prices were down 20 percent, averaging just under $40 per cwt. (live weight basis).

Poultry made up the largest element of livestock income in 2009 in Kentucky, continuing three years of increased sales, the report stated: “Total broiler production for 2009 was down 4 percent from the previous year, and exports dropped by 6 percent, though exports remained at almost 20 percent of industry production.

While broiler demand is expected to increase about 2 percent in 2010, stronger demand will offset the increased production, so economists expect prices to remain at approximately 80 cents per pound, near the level of the past two years.”

Burley tobacco growers saw an increase in planted acres and higher yields, a fact that helped offset the decline in dark tobacco production. According to the UK report, the USDA predicts Kentucky’s tobacco production will total 207.4 million pounds, which is slightly more than the 2008 crop – the highest production level since the 2004 buyout.

The outlook for next year may not include an increase, however; Snell does not expect buyers to ask Kentucky growers to plant additional acres in 2010.

There were bright spots in 2009. Both corn and soybean were on course to be record crops. Leland Brown, director of the USDA National Agriculture Statistics Service Kentucky Field Office, said the state recorded its largest corn crop.

“The reports on yields so far have been very good,” he said. “The November crop report had corn at 160 bushels per acre. There’s a record high production forecast for soybeans for Kentucky. Yield was a record 46 bushels per acre.”

The UK experts expect a mixed bag for 2010, and much of that depends on how well the nation weathers the economic crisis.
“Whether or not Kentucky agriculture recovers and starts to rebuild itself in 2010 will depend largely on what happens in the world economy, and there is some optimism we’ll come out of this worst recession,” said Infanger. “The question is, come out of it in what way?

“The best scenario is come out with a square root recovery; that is, a quick recovery, a return to 2 or 3 percent annual growth for three or four years and that will have very beneficial effects. But if it turns out to be an up and down (recovery) and we don’t really get our legs under this economy, that’s going to be a very different recovery.

“I’m cautiously optimistic that we’re going to see some positive growth out there that will have good implications for Kentucky agriculture,” he added.

Infanger also noted while things might get better, many farmers rely on off-the-farm jobs, and with a high unemployment rate, many farm families could still be adversely affected even if the numbers on the farm go up.