One of the purposes of the Kentucky Farm Bureau (KFB) Annual Meeting is to help provide a variety of farm-related information to its attending members. This year farmland transition and the farm economy took center stage in those informational sessions.

KFB President Eddie Melton said as the ag economy continues to be volatile, it’s important to keep members updated on specific issues.

"We had an array of agricultural economic experts at our recent annual meeting who brought valuable information to our attending members," he said. "It is essential to keep up on the issues affecting our farm families at a time when the ag economy is facing many challenges."

UK Ag Outlook

Once again University of Kentucky?Martin-Gatton College of Agriculture, Food and Environment?(UKMGCAFE) economists gave their annual ag-outlook forecast.

According to information from UKMGCAFE, “While 2024 provided a mixed bag of economic factors resulting in a projected slight 3.3% increase in cash receipts nearing a $8.3 billion record, Kentucky farmers face a multitude of challenges heading into 2025.”

The economists noted that 2025 will be a critical year for agriculture, following a couple of years of falling incomes, tightening finances, and geopolitical uncertainties.

“While Kentucky crop receipts are forecast to fall by nearly 13 percent in 2024, we are projecting that Kentucky livestock receipts will increase by around 17 percent this year on the heels of strong cattle prices and continued growth in our poultry and equine markets,” UKMGCAFE Agricultural Economics?professor?Will Snell said. “Consequently, our estimate of Kentucky ag cash receipts for 2024 may challenge the record high level of $8.3 billion recorded in 2022.” 

Official totals for 2024 receipts will be released by USDA next September and while cash receipts remain strong, it’s a different story for net farm income.

“Even with anticipated higher cash receipts, net farm income for Kentucky farmers will likely follow national downward trends in response to high input costs and limited government payments,” Snell said.

The Farm Bureau Perspective

Those downward trends were reflected in the USDA’s December 2024 farm income forecast. According to information included in an American Farm Bureau Federation’s Market Inter report, that forecast, “confirms just how tough a year it’s been for American agriculture, with slightly revised projections offering little relief to farmers, who are losing nearly a quarter of their income in two years.”

The AFBF report also noted that net farm income is now projected at $140.7 billion for 2024, down

$6 billion (4.1%) from 2023 and $41.2 billion (22.6%) from the $181.9 billion peak in 2022.

While the roller coaster ride continues from a net farm income perspective, agricultural trade brings its own set of challenges. KFB’s Commodity Marketing Specialist Taylor Thompson presented a breakout session, “Global Shifts in Ag Trade and Implications for Kentucky Farmers,” focusing on the agricultural trade issues that are currently plaguing the ag industry.

Breakout Session Specifics

Thompson said the session included three key points that relate to the current state of ag trade in this country and throughout the world.

“The first point dealt with the U.S.-China-Brazil dynamic from the ag side, then we talked about the different nations’ economies and supply chains, and then, the discussion about sustainable aviation fuel,” he said.

Thompson noted that for a long period, China has been a "go-to" market for American agriculture, but he feels the tide is changing especially in light of the number of exports coming from Brazil not only to China but their efforts to accommodate other international markets.

“What Brazil is looking to do in the coming decade is to become more efficient, lower their transportation costs, incentivized, and increase production on the row crop side,” he said. “And that has implications for beef cattle production, as well, from the pasture side. But, in terms of agricultural trade, it's helpful to start thinking about the role of Mexico and Canada now from the North American side. We still send a lot of products to China. However, Mexico is, for us, starting to move into that position of our dominant trade partner in many ways.”

What about tariffs?

In discussing export markets, Thompson said the topic of possible tariffs that could come with the new administration was also discussed during the session.

“During the session, I wanted to focus not only on the significance of trade, but what are some of the risk factors out there specifically around tariffs for growers into 2025," he said. "So, we had a tariff-specific talk, but it should be noted that we still have some tariffs on the books from China dating back to the 2018 trade war and some waivers that are in place. However, we won’t know of anything in terms of brand new until we see the new administration take office.”

Thompson pointed out that just because tariffs are mentioned, it doesn’t necessarily mean it’s going to happen.

“It could be used as a negotiation tool and if you stick a tariff on for two weeks, well that's a lot different than if you've got a tariff that's active for two years,” he said. “The long-term implications versus some of the short-term negotiation tactics is what really people are trying to balance.”

Other nations’ economies

Thompson pointed out several interesting factors about the ag economy that currently exist on a world stage but one of note is getting a newer generation involved.

"I recently read an article in a national business publication that discussed the ag situation in Brazil and how young people there were very interested in their agricultural industry; for them, it was the thing to get into," he said. "But different economies are operating in different ways throughout the world and we have to keep in mind, especially for our young people, that American ag, as a whole, continues to be the best, providing the best quality and best products in the world."     

Thompson added that because there is a relatively high barrier of entry for young people to get into ag production, we have to emphasize to them that it’s absolutely a worthwhile pursuit.

“I think it's one of opportunity certainly, but a recognition that you've got to be a good entrepreneur and you’ve got to understand the industry that you work in and the consumers that you serve,” he said. “For agriculture producers, it’s how can we best understand our consumers, and meet their needs.”

More ag diversification opportunities

Diversification has long been a part of that strategy in Kentucky with more discussions centered around finding more domestic uses to help offset a decline in ag exports.

Thompson said that with American farmers being such good crop producers, there needs to be more trade partners to send U.S. ag products to other places. But from the domestic standpoint, there are opportunities, as well.

“We’ve seen how ethanol has become a normal part of the automobile fuel industry over the years and now we are seeing a focus on what role agriculture can play with sustainable aviation fuel (SAF),” he said. “There's no question that there are airlines and ethanol facilities that are absolutely interested in this, and I think in many ways want to make it happen, right, given the potential that's there.”

Thompson added that the key question now is how we line up all the hurdles and everything that needs to get done to make this a reality.

“Whether it's from the tax credit side or the regulation side of things, there are still some unknowns out there and still some things that need to be done,” he said. “But from the industry perspective, you're not only seeing the talk, but you're seeing the walk from some of these major players in this space.”