By TIM THORNBERRY
Kentucky Correspondent

FRANKFORT, Ky. — The state’s agricultural landscape has changed dramatically over the last decade, with an ag economy once dominated by tobacco production giving way to a more diverse farming environment.

The 40,000-plus tobacco farms have dwindled to fewer than 8,000. With such a decline, it would stand to reason that most of those operations that ceased to produce tobacco have stopped producing altogether, and some did. But other farmers here have found ways to prevail and keep the family farm.

One thing that has helped is the investments made possible in the state’s ag industry by the Kentucky Agricultural Development Fund (KADF) that comes from the Master Settlement Agreement (MSA), a landmark settlement paid by tobacco companies to the state. Half of those funds have been used to help farmers face the changes that have besieged them over the last 10 years.

The fact that the fund has had a tremendous impact in changing the face of state agriculture may be one of the best kept secrets in Kentucky.

And with the economy being as it is, getting the word out of how valuable the fund as been and will continue to be is important as new recommendations for spending are made.

“We have to do our best now to come up with some recommendations for what areas of investments make the most sense for Kentucky agriculture and how do we go about improving the awareness of the value of ag development fund not to just Kentucky farmers but to rural Kentucky and I believe the state as a whole,” said Roger Thomas, executive director of the Governor’s Office of Agricultural Policy, the agency that provides administrative support for the board that approves the usage of KADF.

Making the best recommendations is more important now than ever before because the fund, contrary to what many believe, is not an endless supply of money.

Each year the state receives a certain amount from the MSA based on smoking rates in each participating state. As the country has seen a decline in the number of people smoking, the amounts of revenue distributed from the fund have declined as well.

In April 2010, it was realized that the MSA payment was even less than expected, a fact that could have been a major stumbling block to programs depending on funds.

But thanks to some smart decisions made in the 2008 budget and debt service money that wasn’t expended, the fund will remain viable and capable of addressing the needs of agriculture. What would have been a $9.2 million budget has turned into almost $20 million.

“There were two key events that led to the over $10 million unexpected increase in state funds over what was originally estimated,” said Thomas. “First the Office of the State Budget Director realized a cost savings on bond payments, which returned over $5 million back to the state account.”

The second was due to the foresight of the general Assembly and Gov. Steve Beshear by way of language included in the 2008 budget, noted Thomas.

“The members of the General Assembly and the governor saw the need to protect the Ag Development Fund as much as possible, and this language did just that, returning almost $5 million to the state fund,” said Thomas.

Generalizing the exact wording, Thomas explained that in the event of a lower than budgeted MSA payment during the biennium, the 2008 budget contained provisions that would protect the KADF. As it turned out the April 2010 MSA payment was less than expected thus kicking in the budget provision.

Kentucky Beef Network

Over the years, the fund has proved to be beneficial on a state and county level. Four of those state projects that have arguably had the biggest impact on agriculture include the Kentucky Beef Network (KBN), which has worked to enhance and improve the beef industry in Kentucky. Those efforts by KBN have paid off, too: Kentucky ranks number one in beef production for states east of the Mississippi.

The Kentucky Proud program is another that has received substantial funding. The marketing initiative has been at the heart of diversification efforts as many producers turned to such endeavors as on-farm value added products, increased fruit and vegetable production and expanded livestock production, just to name a few. Kentucky Proud has worked to provide an ample marketplace for these products.

The Kentucky Horticulture Council has enjoyed funding almost from the very start of the program, said Thomas, as it has promoted and helped farmers enter into or expand their horticulture businesses in the state.

The last of the four is the Kentucky Dairy Development Council, which was formed as a direct result of ag development funds being available to try and shore up the dairy industry.

These programs have received funding on a regular basis either annually or biennially.

John Bell serves as president of the Kentucky Horticulture Council (KHC), and has seen first hand how much the KADF has helped that sector of the agricultural industry. He said it has certainly been a factor in its advancement in the state.

“It’s pretty clear to a lot of people involved that received help, how beneficial it is,” said Bell.

Growing up on very much a traditional farm with tobacco being the main cash crop, Bell and his sister became more involved in the farming operation after graduating from college and saw the “writing on the wall” as far as tobacco was concerned even though at the time it was still the main breadwinner on the farm. That is when the farm became more diverse in other areas such as produce and livestock.

“The farm had to support three families instead of one so we maintained the tobacco. We didn’t expand production, but added other crops. The produce started out as mostly wholesale and very little retail and over 20 years, it’s evolved and now it’s more retail then wholesale,” he said of the operation.

The Bell family obviously was ahead of the curve when it came to diversification starting well before the ag development fund was created, but many farmers are just getting started. So, a major amount of funds that have gone to the KHC have been used to help those in the beginning stages of their horticulture operations.
“The biggest chunk of the funds has gone toward new and beginning growers in various ways. Horticulture is fruit and vegetable production, but the larger segment is landscaping, potted plants and beautification crops. And both have played a big part in the diversification away from tobacco,” he said.

Funds were used for such things as to place field representatives with individual farmers one-on-one to help them get started.
Bell added that, as an industry, nationwide, horticulture is growing so producers don’t have to take business from somewhere else. It’s a matter of capturing their share of that growth.

The horticulture industry is indicative of the growth and success farmers have experienced in other areas besides tobacco.

Kentucky’s gross farm receipts have topped the $4 billion mark now for the last four years in a row and the fifth time in the past six years, doing so in a time when tobacco revenue fell off sharply.
That is no small feat for farmers and while all the good things that have occurred in Kentucky agriculture over the last 10 years can’t be attributed fully to the investments of the KADF, it is fair to say the fund has made a sizeable contribution to that success, said Thomas.