Kentucky agriculture takes hit from recession

AP News
Posted: Dec 03, 2009 5:55 PM

Kentucky's slumping horse industry appears on pace to be overtaken by poultry farming as the king of the state's agricultural sector, economists said Thursday.

In a state where horses are a mainstay of the cultural and economic lifeblood, the new top perch for chickens in the pecking order of Kentucky agriculture once seemed unlikely.

But the equine sector has been battered by deep recession, and the poultry industry has enjoyed years of steady growth. As a result, University of Kentucky agricultural economist Lee Meyer predicted that receipts from the poultry sector this year would outpace those from the horse industry by about $180 million.

Meyer said that poultry production, concentrated in western Kentucky, is expected to generate about $930 million in receipts this year. The equine sector is projected to generate about $750 million this year, down from a 2007 figure that exceeded $1.1 billion, he added.

That projection was seen by former Gov. Brereton Jones, owner of a Kentucky horse farm, as further proof that the state's horse industry is in decline and needs a boost.

"You can go anyplace around the world and tell people you're from Kentucky, and the first thing they want to talk about is the Kentucky Derby and the thoroughbred industry," he said. "We risk losing that if everybody refuses to pay attention."

Jones supports expanding gambling at Kentucky's horse racing tracks. A measure to allow video slot machines at tracks passed the Kentucky House but died in a Senate committee during this year's special session.

Thoroughbred sales and breeding stud fees are the two main income sources for the industry, but have taken a big hit from the global recession, UK economists said at a news conference Thursday that coincided with the Kentucky Farm Bureau's annual convention in Louisville.

Sale prices at the major thoroughbred auctions at Keeneland continued a downward spiral this year, especially at its premier yearling sale in September, where totals were down 41 percent from a year earlier. Results weren't quite as bad at November's breeding stock sale, which saw a 14 percent drop from 2008, but that sale was helped by a dispersal of 148 horses from the great Kentucky breeding operation Overbrook Farm.

Several prominent Kentucky horse farms also reported declines in the stud fees they charge for a live foal. Lane's End Farm announced it was cutting A.P. Indy's fee from $250,000 to $150,000. There are also major drops in stud fees for other top stallions, including Distorted Humor and Giant's Causeway.

The weak economy also has hurt demand for recreational and show horses, the economists said.

Poultry production, meanwhile, has been growing for years in Kentucky.

In 2001, poultry receipts totaled about $260 million but had doubled by 2003 and mushroomed to $918 million in 2008. Meyer projected poultry receipts of $976 million in 2010.

"I can't imagine a scenario where horses would come back to predominance for three years," he said.

The poultry sector has benefited from strong consumer demand, solid exports and the popularity of chicken products at fast-food restaurants, Meyer said.

"Usually you increase supply, prices come down," he said. "But if demand truly increases from a preference perspective, then you can have higher prices and higher production. And that's what happened."

He predicted that Kentucky equine receipts will reach an estimated $807 million in 2010.

Jones said those figures don't include the considerable tourist dollars generated by the horse industry.

"You don't get those tourism dollars from the chicken industry," he said in an interview. "If you counted all the dollars, I think the horse industry would still be ahead."

Longtime breeder Arthur Hancock, owner of Stone Farm in central Kentucky, said the horse industry faces a supply-and-demand problem.

"We don't need to be breeding so many horses," he said in an interview. "There are too many horses for the number of buyers out there."

Still, the horse industry has a special allure, Hancock said.

"Nobody's going to come to the state to see chickens. We're still a wonderful industry with a lot of beautiful farms, and we're going through some tough times."

Kenny Burdine, another UK ag economist, said the horse industry "tends to be much more cyclical with the economy" than the poultry industry. That offers hope for an eventual resurgence for equine interests, he said.

Burdine said equine receipts, once the economy bounces back, will probably approach their levels in 2007 and 2008.

Economists said that Kentucky's overall agricultural economy, which reached a historic high in cash receipts last year, appears on track for a drop in 2009 receipts due to the deep recession.

UK ag economist Craig Infanger predicted that Kentucky agriculture will produce nearly $4.3 billion in cash receipts in 2009, down from $4.8 billion the year before but on pace with the five-year average.

"That has obvious implication for the bottom line for a lot of farms in Kentucky and for the general economy," he said.

Farmers were hurt by big drops in prices for major commodities this year as well as declines in ag exports, Infanger said. Kentucky's net farm income for 2009 is estimated to be nearly $1.1 billion, down from $1.5 billion in 2008.

Infanger predicted Kentucky farm cash receipts in 2010 in the range of $4.1 billion to $4.5 billion.


Associated Press Writer Jeffrey McMurray in the Lexington, Ky., bureau contributed to this report.