Net farm income in Ky. could drop to lowest level since 2010
Updated 3:32 pm, Thursday, December 1, 2016
LOUISVILLE, Ky. (AP) — Kentucky's farm economy remains caught in a downturn amid lower commodity prices and large stockpiles, potentially driving net farm income to its lowest level since 2010, agricultural economists said Thursday.
Sharp declines in cattle prices were a big factor behind this year's projected downturn in farm income, but slumping grain prices and tobacco receipts contributed to the slide since the sector's record-breaking performance two or three years ago, the University of Kentucky economists said.
"We're a cyclical industry," UK ag economist Will Snell said. "We will see, I think, some rebounds. The question is, when's that going to happen?"
A full recovery might not take root quickly, as the economists projected fairly stable cash receipts and net farm income levels in 2017.
Modest gains forecast next year in poultry, hogs, horses and tobacco are expected to offset projected losses in grains, dairy and cattle, they said.
Kentucky's net farm income — the amount left after expenses — is expected to drop below $1.5 billion in 2016, down from $1.7 billion in 2015, they projected. This year's estimate is well off the nearly $3 billion peak in 2013.
Statewide agricultural cash receipts in 2016 are forecast at $5.4 billion, down 7 percent from $5.8 billion in 2015 and off 17 percent from the record high of $6.5 billion in 2014, the economists said.
The UK forecasts have become a fixture at the Kentucky Farm Bureau's annual meeting in Louisville.
Talk of tougher times are a reality already for Robert Amburgey, who struggled to make a profit on his Montgomery County farm.
A late-season dry spell cut his corn yields to about 60 bushels an acre this year, well off his usual 100 bushels per acre. Yields were down sharply for his tobacco crop, and he's holding on to cattle he typically would have sold already, hoping prices rebound next year.
"The bottom line is it's going to be short this year," he said in an interview. "It's not going to look too good."
The state's cattle receipts fell by more than 30 percent amid rising beef, poultry and pork supplies, the economists said.
UK ag economist Kenny Burdine predicted cattle producers will see improved prices next spring but then another significant price drop from spring to fall, due to an expected increase in beef cow numbers and continued competition from other meats.
"I don't think we're at the bottom yet," he said, predicting it could still be one or two years away.
On the positive side, poultry receipts are back on track, Burdine said. Poultry remains the state's top agricultural enterprise, accounting for 23 percent of projected 2016 ag sales.
Horses are next at 17 percent of projected sales. Receipts for Kentucky's famed equine industry were relatively stable in 2016.
Grain receipts were mixed, with increased soybean sales while corn and wheat sales declined, the economists said.
Another factor in farm income decline has been the end of tobacco buyout payments in 2014 that had supplemented incomes for many Kentucky farmers and landowners. Those buyout checks were holdovers from a now-defunct price-support and quota system that guaranteed minimum tobacco prices for decades.
For farmers still growing tobacco, receipts slumped to their lowest post-buyout level, mainly because of unfavorable weather, Snell said.
The biggest winners in the current ag sector slump are consumers, the economists said. Prices for many food items were stable to lower this year, and food price inflation is expected to remain below historic levels next year, they said.