Lexington, KY - It doesn't stand to reason that an industry which tops the $4 billion mark in sales would indicate a good news-bad news scenario, but that pretty well sums it up for the state's agriculture sector.
The USDA's Economic Research Service recently released final numbers for 2009 and depending on who you talk to, the news about farm cash receipts is either really good or an indicator of what the entire country is going through economically.
Agriculture Commissioner Richie Farmer is singing the praises of producers noting the accomplishment being made in such a down economy.
"I am constantly amazed but never surprised by Kentucky's resourceful and determined farmers," he said. "To surpass $4 billion in such a challenging economy is a remarkable achievement. It also shows that Kentucky's efforts at diversification are working and the Kentucky Proud program is helping producers find markets for their products."
The 2009 total, which is $4.26 billion to be exact, marks the fourth year in a row and the fifth time in the past six years the accomplishment has been achieved, an indicator of the strength of the agriculture industry, noted University of Kentucky (UK) College of Agriculture Economist Lee Meyer.
The problem, Meyer said, is that the 2009 numbers were down nearly 10 percent from 2008 - a significant drop in a time when profit margins are tight.
"The (cash receipts) are what a farmer actually gets a check for but it takes nothing into account about profitability, it's just gross income," he said. "You think of a corn or soybean farmer when they get a slug of income in the fall, when they take their crops to the elevator, then they have to start paying all those bills they have loans out for; all the fertilizer, the seed, the crop protection chemicals; all those we call variable costs that happen every year."
And in the case of some grain producers, they have the really big expenses such as machinery and land rental.
"When you look at these numbers, it's really just a starting point. You are unlikely to have more profit if the gross income isn't going up but just because it went up doesn't mean you are more profitable," said Meyer.
Farmers know that all too well as input costs have consistently gone up even though fuel and some fertilizer costs have backed off their spikes of a couple of years ago. But Meyer said it is fair to note that the level of cash receipts places the agriculture sector among the top industries in the state and, affirming what Farmer said, it demonstrates just how diversified agriculture has become.
"One of the things it shows is the diversity of Kentucky's agriculture when you look at everything (including) how the poultry industry has grown and the livestock sector," he said.
Meyer also said the balance between crops and livestock is close to even, which makes the industry a little more resilient.
"If income or profits are off or yields are off in one area, often we are better off in one of the other ones," he said.
The 2009 breakdown of the different areas showed a new "king of commodities" in the state even though numbers were down across the board, for the most part, from 2008 levels.
Poultry and eggs led the way with $911.6 million in cash receipts, ending a reign the horse industry had enjoyed for many years. The equine industry weighed in at $780 million, while soybeans were the top crop with $527 million, just edging out corn with $524 million in cash receipts.
Cattle and calves generated $484.6 million, while tobacco receipts rose for the fourth year in a row with $382.8 million worth of receipts.
Hopefully the downswing won't continue as commodity prices are holding their own, said Meyer.
"We're looking at very good crop prices right now and cattle prices have gone up quite a bit, so if these trends continue, and we think they will, even though we have smaller beef cattle numbers in Kentucky, we might have significantly higher gross income, as well as profits," he said.
While the $4 billion mark sounds good, Meyer is quick to point out the numbers for 2009 are nothing to crow about as most sectors stumbled.
"I wouldn't call this good news. It's down 10 percent. The overall number in terms of stability isn't bad, but we are still down. The good news is what's happened after 2009. With the crop and livestock prices, we're going to be better off this year," he said.