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Economists: Kentucky ag receipts will top $4 billion
Kentucky Correspondent

LOUISVILLE, Ky. — With dry weather conditions and uncertainty in the tobacco industry, Kentucky farmers saw their share of hardships in 2005.

Nevertheless, 2005 receipts for the state’s farm products are expected to top $4 billion, according to a group of University of Kentucky ag economists.

A report prepared by the group said “record cash receipts coupled with government and tobacco buyout payments will enable net farm income for 2005 to remain relatively strong, despite significant increases in energy-based input prices and rising interest rates.” The report went on to say that 2005 livestock cash receipts gained an estimated 6.3 percent from the previous year, but crop cash receipts declined by 19 percent.

That decline was attributed mostly to the more than $150 million drop in tobacco farm cash receipts with a $123 million decline in cash receipts of the state’s major row crops including corn, soybeans and wheat. The only crop sector showing an increase was floriculture/ornamental, which increased $8 million.

Livestock receipts, including equine, cattle and poultry showed significant estimated increases. The three collectively represented 89 percent of all livestock cash receipts in the state with equine receipts leading the way, exceeding $1 billion for the second time. Poultry is second again in the livestock category with estimated cash receipts of $907 million, up 11 percent from 2004 and beef cattle receipts increased to $652 million, a 5 percent gain. Dairy receipts declined due to lower milk prices.

UK Tobacco Economist Will Snell sees the possibility of better burley receipts for some producers next year.

“Kentucky’s tobacco industry saw an exit of more than half of its growers in 2005, with the remaining growers generally taking a fairly conservative attitude in their production response during the first year of the post-buyout era,” he said.

“This coupled with a poor growing season resulted in the crop value falling below $300 million, compared to exceeding $400 million for the past three years. For 2006, growers are anxiously awaiting the contract price schedule. If price incentives are present, opportunities arising from a more competitive price environment for U.S. tobacco could allow Kentucky tobacco cash receipts to rebound back over $300 million in 2006.”

This year’s cash receipts for tobacco are at their lowest since 1987, but Snell sees opportunity for some producers to expand next year. “After a year of ‘observing,’ many growers and buyers are still uncertain how the industry may evolve in the post-buyout era,” wrote Snell. “As in 2005, there will likely be another noticeable exit of burley growers in 2006, with production continuing to shift to the areas that can consistently produce the quality attributes demanded by the companies at the lowest cost.

“However if price/profit incentives are provided in the 2006 contracts, some of the remaining growers will likely expand. While the future for those remaining in the sector remains very uncertain, production and cash receipts for the Kentucky tobacco sector have the potential to expand in future years if growers are provided price/profit incentives to remain in production.”

Expected corn and soybean yields look promising according to the report. U.S. corn production remained strong in 2005 with an expected total of more than 11 billion bushels for a second consecutive year. USDA has forecast a “second best ever” 2005 U.S. corn yield average.

Strong soybean yields are expected as well.

UK Grain Marketing Specialist Steve Riggins wrote, “The situation for soybeans is very similar to that for corn – a second year in a row of very large production – 3 plus billion bushels.”

Riggins went on to say that, currently, the USDA places the U.S. average soybean yield at a record setting 42.7 bushels per acre, up a half bushel per acre more than last year’s record yield.

Wheat acres harvested for grain have stabilized at last year’s level and the yield for the 2005 crop averaged 42 bushels per acre just under the two prior crop years.

The 2006 numbers are expected to be even better with the possibility of total expected receipts to set a record.

“Given normal weather and continued world economic growth, we expect Kentucky farm cash receipts to potentially reach a new record of $4.14 billion in 2006,” the economists said.

“Cash receipts increases are expected in equine, poultry, floriculture/ornamental, corn and tobacco (sectors.) Cash receipts for soybeans, dairy and cattle are expected to decline slightly. But the 2006 outlook for the entire sector suggests a continuation of relatively strong net farm income in response to ag sales, government payments and buyout checks.”

Published in the December 21, 2005 issue of Farm World.