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Tobacco buyout aids farm receipts rise for Kentucky
Kentucky Correspondent

LEXINGTON, Ky. — The state set a record of more than $2 billion in net farm income (NFI) for 2005 according to recent USDA data even though cash receipts for most commodities fell. The increase was credited to government payments, mostly tobacco buyout money, of over $800 million.

Even though the state NFI rose, cash receipts for most commodities dropped last year to the tune of $151 million over 2004 but those commodities figures are expected to rise in 2006 thanks to a good growing year. Cash receipts for state commodities brought in $3.97 billion last year.

Recent information from the National Agricultural Statistics Service showed state corn, soybean and burley tobacco yields were all up over August forecasts. This year’s corn crop is expected to be the third best on record, while soybeans could see their best year ever. University of Kentucky Agricultural Economist Will Snell is optimistic the 2006 burley crop will be better than last year.

“Following a year of transition evolving from the buyout, Kentucky’s tobacco production, despite disease pressure and labor problems is expected to rebound in 2006,” said Snell. “Additional price incentives, coupled with a better growing season, are expected to boost Kentucky’s total tobacco production in 2006 to 194.3 million pounds according to USDA’s September crop report.”

That’s an 11 percent increase overall with the burley production (160.6 million pounds) forecast to be up by 12 percent, while dark air-cured (14.6 million pounds) is expected to be 41 percent higher, with a 6 percent drop in dark fire-cured production (19.1 million pounds) as contracted acres declined.

UK Extension Tobacco Specialist Gary Palmer said this year’s crop should be the best in more than a decade but there are still some concerns.

“The 2006 crop is the best crop since 1994. The big difference is that in 1994 curing conditions were not good,” said Palmer. “The main concern is for labor to put this crop in the barn. Companies complaining about immature tobacco crops in the past may find a much more mature crop at the market.”

The recent wet weather in addition to labor concerns has also helped to postpone the tobacco harvest with curing problems already being reported due to the excessive moisture according to Snell.

“The weather and the critical labor supply situation is causing some tobacco to remain in the field too long,” he said.

Tobacco moving west
Since the tobacco buyout, over 100 counties remain in tobacco production, but the anticipated shift in the geographic production area is moving more toward the western portion of the state.

“According to USDA, data, the Midwestern and Central crop reporting regions accounted for 40 percent of Kentucky’s burley production in 2005 verses 32 percent of the state’s output during the pre-buyout 1980-2004 period,” said Snell.

“Alternatively, Eastern Kentucky which had grown around 13 percent of the state’s burley historically accounted for 8 percent of Kentucky’s burley last year. Additional shifts likely occurred in 2006 as a significant number of growers in the western third of Kentucky expanded acreage.”

Regardless of where it is produced, U.S burley production for 2006 is still expected to fall short of the anticipated industry needs.

This year’s crop is expected to exceed 224 million pounds, a 10 percent increase over last year but below the projected 275 to 300 million pounds needed by the industry to meet current use levels said Snell.

A decline for 2006
U.S. farm receipts were the second highest recorded with farmers earning $74 billion in 2005, but 2006 will be a different story according to a report from the USDA.

NFI is expected to drop to $54.4 billion in 2006 even though crop production figures show increases across the country as well as in the state.

Many factors will contribute to the decline including lower livestock production, increased fuel cost, increased labor costs and a decline in government payments.

Even with these declines, the news isn’t all bad. Total production values nationally are still well above a 10-year average according to the USDA report.

“The value of total production in the U.S. farm sector is forecast to be $273 billion in 2006, following the record $283 billion in 2004 and $275 billion in 2005,” the report explained. “All are considerably above the 10-year average of $237 billion.

“For 2006, the value of crop production is projected to be down $10.5 billion from its high in 2004 but still $9 billion above its average over the previous 10 years. The value of crop production will benefit primarily from projected corn prices plus stronger sales of vegetables, fruits and nuts, and greenhouse/nursery products. The value of livestock production is expected to be down $6.5 billion from 2005, but still $17 billion above its 10-year average.”

This farm news was published in the Sept. 20, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.