Coming off a period of record cash receipts that boosted rural Kentucky, farmers are facing downward trends caused by lower commodity prices, sluggish exports and large stockpiles that are sowing declines in farm income, agricultural economists said Thursday.
Agricultural cash receipts in 2015 are projected to be $6 billion, down 8 percent from last year's record amount of $6.5 billion — which was up from the previous high of $6.2 billion in 2013, the University of Kentucky economists said. This year's projected amount would still rank as the third highest on record.
"We've been through some pretty good times in agriculture," UK ag economist Will Snell said. "Records across the board in terms of prices, in terms of production, trade, land values. ... We also know that ag always cycles. We have some good years and then we have some challenging years."
The downturn is expected to continue in 2016, the economists said. They predicted statewide cash receipts will slip to $5.9 billion next year.
An even larger decline is forecast for statewide net farm cash income — the amount left after expenses.
Net income is expected to drop below $2 billion this year, and next year's amount may approach the $1.4 billion average early this decade, they said.
The state's net farm cash income peaked at $2.75 billion in 2013, followed by $2.5 billion in 2014.
The forecasts by the UK economists have become a fixture at the Kentucky Farm Bureau's annual meeting in Louisville.
Several factors have caused the farm-sector slump.
Commodity prices have fallen sharply from peak levels a few years ago, Snell said. A surging dollar hampered ag exports, along with the weakening of some foreign economies, he said. A strong dollar makes U.S. goods less competitive. Surpluses of crop and livestock supplies are another factor.
Another contributor was the end of tobacco buyout payments that had supplemented incomes for many farmers and landowners. Those buyout checks were holdovers from a now-defunct price-support and quota system that guaranteed minimum tobacco prices for decades.
Gilbert Edgington, a Garrard County farmer in central Kentucky, said he'll miss those buyout checks but never depended on the payments.
"I just used that as a bonus in my operation," he said.
It was a challenging year on the farm for Edgington. Yields were down for his tobacco crop and he contended with lower cattle prices.
"I hope it's a better than break-even year," he said.
Looking ahead to next year, he said: "We'll try to do the same thing, probably, and hope the yields come up and it will all pan out."
Despite the pessimism, there were positive developments in Kentucky's farm sector during the year, Snell said. Grain yields were high, the poultry and equine sectors had solid performances and cattle prices were strong in spring and summer, he said.
Those factors partly offset slumping fall cattle and grain prices and falling tobacco revenues, Snell said.
Higher poultry production is forecast in 2016. The state's diversified farm economy still remains livestock-dependent.
Poultry remains the state's top agriculture enterprise, accounting for 22 percent of projected 2015 sales, the economists said. Horses and cattle are next, each with 16 percent of projected sales. Corn and soybeans each make up 13 percent of projected sales.
The value of Kentucky's tobacco production is expected to fall below $350 million this year and next year, after a post-buyout high of $448 million in 2014, Snell said. An improved supply-demand balance is expected in 2016, which could minimize any changes in burley contract volumes, he said.