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Ky agriculture could become $5B industry in 2011

Ky agriculture could become $5B industry in 2011

Posted: Tuesday, December 28, 2010 8:01 pm

LOUISVILLE, Ky. (AP) — Kentucky agriculture overcame drought and a rocky economy to produce higher cash receipts this year, and those cash yields could grow to $5 billion in 2011 for the first time, economists said recently.
Led by robust exports and strong grain prices, farming appears on pace to reap $4.4 billion to $4.7 billion in cash receipts this year, up from $4.3 billion in 2009, said University of Kentucky ag economist Craig Infanger.
Higher farm income will contribute to economic recovery in rural Kentucky, uplifting not only farm families but merchants selling tractors, pickup trucks, grain seed, fertilizer and other goods, Infanger said. Kentucky has about 85,000 farms.
“We’ve come out of this recession with a lot of financial stress,” he said. “This is going to help farmers pay down debt and strengthen their balance sheet.”
Net farm income — the amount left after expenses — is projected to reach $1.3 billion this year, excluding government payments, just below the state’s 10-year average, he said. Last year’s net farm number slightly exceeded $1 billion.
Looking ahead, Infanger forecast 2011 cash receipts in the range of $4.8 billion to $5.2 billion, which would be a record high for gross farm income based partly on continued surging exports and a bullish grain sector.
“I don’t think the $5 billion is a once-in-a-lifetime number,” Infanger told reporters. “It’s a reasonable estimate of what cash receipts might be, and we should be able to build on that.”
The upbeat projection hinges on favorable weather and trade conditions, he cautioned. And despite higher receipts, Kentucky agriculture trailed growth trends in the overall U.S. farm sector, due largely to the drought and lack of stronger growth in the horse industry, he said.
A team of UK ag economists assessed the breadth of Kentucky agriculture during a presentation coinciding with the annual Kentucky Farm Bureau convention.
In other trends, corn production may be poised to overtake the world-renowned equine sector next year as the state’s second-leading cash producer, behind poultry farming, which solidified its perch as the top source of ag receipts.
“If we come out with extra acres and some good season-average prices, then yes, I think corn could move up,” Infanger said.
Equine receipts showed only slight improvement from 2009, while higher corn prices helped offset disappointing yields caused by a prolonged drought that kept grain receipts from being significantly higher, the economists said.
They predicted the state’s livestock receipts will likely increase by $100 million to $200 million in 2011.
It’s not entirely rosy for Kentucky farming.
Demand continues to wane for burley tobacco, once the king of Kentucky agriculture, due to lower U.S. cigarette sales, higher prices, the sluggish economy and smoking restrictions, said UK ag economist Will Snell. He estimated that the volume of burley pounds grown under contract to tobacco companies shrank by 20 percent to 30 percent this year.
Tobacco companies are likely to take a conservative approach to offering grower contracts next year given the industry’s uncertainties, he said, including global efforts to crack down on cigarettes laced with flavorings. American burley is laced with flavors to smooth its harsh taste.
Kentucky is the nation’s top producer of burley, a product in many cigarettes.
The stack of challenges facing tobacco spurred Snell to wonder aloud: “Have we seen the last $300 million tobacco crop here in Kentucky, given all the factors that are affecting this industry?”
The farm sector’s ability to absorb the decline of tobacco shows its resiliency, Infanger said.
“It says that Kentucky agriculture is dynamic, it can change, it can adapt,” he said.
Exports remain a key factor in the agricultural sector’s health. Of every $5 in net farm income, $2 to $3 is linked to international markets, Infanger said.

Published in The Messenger 12.28.10

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