Economist: Kentucky farm sector could set record receipts
FRANKFORT, Ky. (AP) — Kentucky agriculture appears to be on a record pace to surpass $7 billion in cash receipts in 2022, bolstered by robust commodity prices that could reward farmers hit hard by rapidly rising production costs, an agricultural economist told state lawmakers Thursday.
Despite all the challenges of this year, University of Kentucky ag economist Will Snell said his biggest concern is for 2023, when commodity prices could drop without corresponding declines in farmers’ input costs. Snell appeared before a legislative panel to discuss the effect of surging inflation on Kentucky’s farming sector.
Increased farm production costs have outpaced rising prices elsewhere in the economy, Snell said. Fertilizer costs, for example, have more than doubled, he said. Snell recounted his recent conversation with a farmer who owed $100,000 to a farm store. Farmers have absorbed those sharply higher expenses in hopes their investments will be rewarded later in the year.
It’s a big risk, but one that could pay off. Market prices for Kentucky’s agricultural commodities — from corn and soybeans to chickens and hogs — have surged since 2020.
As a result, Snell predicted a good year for Kentucky agriculture in 2022, assuming key variables pan out — that farmers have favorable growing conditions and export markets remain strong.
“I feel pretty confident to say as long as we have decent growing conditions, and with the prices we’re expecting this fall, that we are going to well exceed $7 billion in cash receipts for agriculture for 2022,” Snell said.
The Bluegrass State’s record for ag cash receipts was $6.5 billion in 2014. Economists suspect last year’s amount exceeded that level, but the data won’t be available until later this summer, Snell said.
Tobacco used to be the king of Kentucky agriculture, but its decline has resulted in a highly diversified farm sector. The state’s top agricultural commodities include corn, soybeans, poultry, horses and cattle.
Crop prices this fall have the potential to result in higher net farm income for grain farmers, assuming they have good yields, Snell said. Strong export markets for corn and soybean are expected to keep crop prices higher this autumn, he said. For livestock producers, higher feed costs will pose a challenge but higher market prices will help offset higher expenses, he said.
As for Kentucky’s net farm income — the amount left after farmers’ expenses — Snell said he does not expect a record amount this year. But it could end up “relatively high” compared to the past decade, assuming yields are good, he said.
But he warned about the prospects for a bumpier year for Kentucky farmers in 2023.
“The world will respond to these higher commodity prices and we will see probably some pushback and lower commodity prices -- especially crop prices -- that we anticipate for 2023,” he told lawmakers. “Those input prices tend to be fairly sticky. We typically have not seen them come down as fast as commodity prices. And as a result, that’s our biggest concern.”