Trade-related relief payments cushion some Kentucky farmers

LOUISVILLE, Ky. (AP) — International trade uncertainty looms over Kentucky's farm economy, which was able to maintain stable income levels with a boost from government relief payments offered to farmers hit hard by low commodity prices caused by the trade conflict with China, agricultural economists said Thursday.

This year's statewide farm cash receipts are projected to be $5.9 billion, equaling the past two years but well below the $6.5 billion level in 2014, a team of University of Kentucky ag economists said. Higher receipts are projected for the state's renowned horse industry as well as the corn, wheat, dairy and hemp sectors, reflecting the state's diversified farm production.

Kentucky's net cash income — the amount left after farmers' expenses — is expected to exceed $1.8 billion in 2019, up slightly from last year, the economists said.

The uptick has more to do with the influx of trade-related federal relief payments to farmers than the ag industry's performance, an economist said. Besides trade uncertainties, bluegrass state farmers endured tough weather conditions and low commodity prices.

“It's not because of the marketplace," UK ag economist Will Snell said. “It's due to the fact that farmers are receiving a pretty significant volume of government payments. While that's good news in the short term, I don't think it's sustainable for the ag economy."

Relief payments doled out to Kentucky farmers affected by President Donald Trump's trade war with China will total about $240 million this year, Snell said.

A banker told him this week that relief payments from the Market Facilitation Program made the difference in some farmers' ability to make their loan payments, he said.

Combined with other federal farm programs, Kentucky farmers could receive more than $300 million in direct government payments in 2019, Snell said.

Kentucky's farm cash receipts are projected to exceed $6 billion in 2020, the ag economists said. The poultry, cattle and hog sectors are forecast to rebound from this year's levels, they said. But the farm economy remains “very vulnerable," especially if hit by low crop yields, more trade disruptions, higher interest rates or the end or reduction of government relief payments, Snell said.

The state's equine industry had another strong showing in 2019, with receipts continuing to surpass $1 billion, said UK ag economist Kenny Burdine. More growth is expected in 2020, provided the national economy remains relatively strong, he said.

But the poultry sector will remain Kentucky's top agricultural enterprise, accounting for 21% of all projected sales in 2019, Equine, corn, soybeans and cattle are expected to follow in that order.

Kentucky's corn receipts grew in 2019, the result of a 220,000-acre increase in harvested corn acres and a slight increase in yields from a year ago, the economist said.

“Trade uncertainty will continue to impact grain crops, particularly soybeans, into 2020," said UK ag economist Todd Davis. “Kentucky producers may find some opportunities to sell their stored grain to producers in areas of the Midwest devastated by flooding last spring, as they will need grain to feed their livestock.”

Tobacco, once the king of Kentucky agriculture, had a tough year. The value of the state's crop is expected to fall below $300 million this year, compared to a five-year average of about $350 million, Snell said. In the late 1990s, tobacco receipts were around $900 million and represented about one-fourth of the state's overall farm cash receipts. Now the crop accounts for a small slice of overall receipts.

Meanwhile, the state's fledgling hemp industry registered more growth in 2019, the economists said. Based on price and production estimates, Kentucky producers could receive between $55 million and $65 million from hemp sales, representing 1% of the state's total ag receipts, they said. That's up from the $17.7 million that Kentucky growers made in 2018.

But the spread of hemp production around the country could put more “downward pressure" on farm-level hemp prices, despite growing product sales, they said.

The ag forecasts by the UK economists have become a fixture at the Kentucky Farm Bureau's annual meeting in Louisville.