After achieving remarkable success the previous two years, Kentucky's agricultural economy will likely experience a modest decline in 2023 and some sectors will face continued challenges into 2024.
The global response to price incentives, stemming from tight global stocks and trade opportunities, has significantly impacted the state’s agricultural sector.
According to University of Kentucky Martin-Gatton College of Agriculture, Food and Environment economists, researchers and extension specialists, this anticipated downturn is primarily attributed to price declines for several key farm commodities.
“Several challenges confront Kentucky agriculture,” said UK Department of Agricultural Economics professor Will Snell. “Increased global production is leading to significant price drops for several important Kentucky commodities like corn, soybeans, wheat and dairy. Moreover, the global economic slowdown is diminishing the demand for agricultural products. Political tensions and ongoing conflicts abroad are also disrupting key trade routes.
“Higher interest rates and labor costs are more than offsetting lower feed and fertilizer expenses. Land values are continuing to be relatively strong, despite shrinking farm profit margins and climbing interest rates. However, signs indicate that land price growth is slowing down, but overall, the balance sheet for agriculture remains favorable heading into 2024.”
Kentucky outlook
Kentucky’s agricultural cash receipts are expected to decrease from a record high $8.3 billion in 2022 to $8.1 billion in 2023. This drop stems mainly from lower earnings in corn, soybeans, dairy and tobacco, despite notable gains in cattle and wheat receipts. Poultry remains the top commodity for cash receipts, with cattle prices seeing a significant rise.
Kentucky's agricultural exports, traditionally a strong economic contributor, are likely to decline in 2023. Factors such as the strengthening United States dollar and a weaker global economy contribute to this downturn. This reduction in exports, combined with increased agricultural imports, might result in an unusual trade deficit for U.S agriculture, diverging from its history of significant trade surpluses.
Notably, the state's cattle markets have shown resilience. Even though the markets have cooled off this fall, Kentucky's calves and feeders are fetching much higher prices compared to 2022. This is a positive sign for local producers, reflecting a healthy demand for quality livestock.
However, this optimism is tempered by looming challenges. Hay supply and costs are becoming increasingly concerning for cow-calf operations as winter approaches. The rising costs and dwindling hay availability could strain resources, impacting overall productivity and profitability.
Source: uky.edu
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Categories: Kentucky, Business