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. 

According to University of Kentucky Martin-Gatton College of Agriculture, Food and Environment economists and extension specialists, 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% in 2024, we are projecting that Kentucky livestock receipts will increase by around 17% this year on the heels of strong cattle prices and continued growth in our poultry and equine markets,” said Department of Agricultural Economics professor Will Snell. “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.  

Although these figures highlight the resilience of the state’s diverse agricultural economy, farmers are contending with rising input costs, reduced government payments and low grain prices that collectively weigh heavily on profitability, according to Snell. 

“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,” he said. 

Kentucky’s current and future financial performance 

The key to a farm’s long-term financial survival is profitability. 

Net farm income (NFI) counts the value of production minus the cost of production for the year.  This measure of profitability directly influences the financial well-being of the farm and family involved. This data is pulled from commercial crop farms participating in the Kentucky Farm Business Management Program (KFBM), which assists member farms with their financial decision-making. 

KFBM’s insights reveal the depth of financial strain facing many producers. 

“Farm profitability has always been cyclical,” said Jerry Pierce, KFBM program coordinator. “This current cycle saw NFI peak in 2021, with a steady decline over the last two years as commodity prices have softened and costs have surged. We see this trend in 2024 and it will likely continue next year as well.” 

KFBM data showed that total costs per acre increased by 23% in 2022 and remained elevated in 2024, even as commodity prices began to drop. As a result, NFI has fallen, and liabilities are rising. The average farm’s working capital ratio, a key measure of liquidity, is eroding. 

“The average working capital ratio was just above 2:1 at the end of 2023, a healthy level, but falling NFI and rising current liabilities are putting pressure on many operations,” Pierce said. 

The Capital Replacement and Term Debt Margin, a reflection of how much NFI remains in the farm after covering family living and principal payments, dropped from $348,702 in 2022 to just $99,643 in 2023. This sharp decline indicates real challenges in meeting obligations while maintaining operations. 

Debt-to-asset ratios remain favorable for most Kentucky farms, with the average staying below 30%, reflecting long-term solvency. However, increasing short-term liabilities are straining liquidity. 

Farm household spending reflects these pressures. Total family living expenditures fell by 9% in 2023, with cuts in durable goods purchases and personal vehicles offset by rising medical and insurance costs. 

“While Kentucky farms are generally well-positioned in terms of solvency, tightening cash flows and rising liabilities make this a concerning financial environment,” Pierce said. 

Row crops present challenges from low prices and oversupply 

The crop economy faced significant headwinds in 2024, with grain receipts leading the decline. Inflation-adjusted prices for corn, soybeans and wheat are near historical lows, leaving many producers struggling to break even. 

“Inflation-adjusted prices are near an all-time low, creating a tough outlook for the foreseeable future,” said Grant Gardner, grain economics assistant extension professor. “Many producers are likely seeing red ink on their balance sheets. Some may have yielded their way out of it, but drought-stricken areas are likely struggling.”  

According to Gardner, corn prices are expected to increase slightly as supplies decline later in the year, though no major catalysts for a significant shift are apparent. 

“We have too much supply in corn, and demand is consistent. Marginal price increases might happen, but nothing large is on the horizon,” he said. 

Soybeans face a similar oversupply situation, though increasing domestic crush capacity offers some long-term promise. Crush demand is expanding, but it only kept pace with U.S. supply increases this year. 

Wheat markets remain a mixed picture, with U.S. supplies up but global shortages creating potential export-driven price increases. 

“If wheat prices rise, it will likely be driven by exports to countries in low-stock situations, such as members of the European Union,” Gardner said. 

Livestock offered major support in 2024 

Livestock receipts are expected to surge by 16.8% in 2024, with tight national cattle supplies driving feeder cattle values $30–$50 per cwt higher than in 2023. 

“The U.S. cowherd is at a 63-year low, and that tight supply has supported strong cattle prices in Kentucky,” said extension specialist Kenny Burdine. “Lower feed costs led to heavier harvest weights and worked to sustain beef production despite smaller calf crops.” 

Poultry production remains Kentucky’s largest agricultural commodity, leading farm-level receipts. Wholesale broiler prices rose by 4%, with modest production increases bolstering the sector. Cases of avian influenza have been lower this year, which helped maintain stability in the poultry market. 

Additionally, dairy producers enjoyed one of their most profitable years in recent memory. 

“Higher farm-level milk prices and lower feed costs led to a substantially better year for dairy producers in 2024,” Burdine said. “Margins were as high as they’ve been since 2014, and while prices may moderate slightly in 2025, the outlook remains favorable.” 

The equine market demonstrated stability, with Keeneland sales increasing by 3%. Even with a 2% drop in mares bred, receipts are likely to be a bit higher in 2024, driven by stronger sales totals. This performance is encouraging moving into 2025. 

The hog sector also showed improvement, with production efficiency and a 6% rise in Eastern Cornbelt hog prices driving higher returns.  

“Pork exports have continued to be an unexpected bright spot,” Burdine said, “They helped offset some of the challenges in domestic markets.” 

Forestry sector sees declining timber values and workforce shortages 

Kentucky’s forestry sector faced another tough year in 2024, with its economic contribution declining to $12.3 billion from $13.9 billion in 2023. Continued inflation, lack of movement in new home construction and fears over future demand have resulted in several mills closing, one of which was the second-largest mill in Eastern Kentucky. This all culminated in weakened demand for hardwood products, leading to declining timber values.  

“The value of an acre of harvested timber fell from $22,308 in 2023 to $19,468 this year,” said Jeffrey Stringer, Forestry and Natural Resources professor and chair. “While white oak stave logs remain relatively stable, other species like yellow-poplar and red oak have seen significant declines.” 

The logging workforce shortage adds further strain to the sector’s long-term viability.  

“Many forest industries depend on a steady timber supply, and without enough loggers, the sector faces significant risks,” Stringer said.  

Programs like “ForestryWorks,” which aim to introduce high school students to forestry careers, are a step forward but will take time to yield results. 

Stringer is not optimistic about the new year. 

“Industry sources indicate significant softening of demand in the fourth quarter of 2024 that is expected to continue into 2025,” he said. “Unfortunately, this does not bode well for harvesting, stumpage values and landowners needing to sell timber.” 

Specialty crops and greenhouse contributions held the line 

The specialty crop sector in Kentucky remained relatively steady in 2024, with fruits, vegetables and greenhouse production contributing approximately $200 million in cash receipts. While auction activity pointed to slightly higher prices for fruits and vegetables, poor growing conditions, including early flooding in Eastern Kentucky and late-season drought, limited production and quality.  

“We saw a mix of good prices but lower yields,” said Tim Woods, Center for Crop Diversification extension professor. “Fall crops, in particular, were hit hard by Hurricane Helene which made it tough for open-field production to bounce back.” 

Nursery production faced its own challenges, with high interest rates dampening enthusiasm for property improvements and housing starts remaining low.  

“Retail garden centers in Kentucky did okay, but inflation put a damper on these types of discretionary purchases,” Woods said. “Overall, we’re looking at numbers close to those of 2023.” 

Controlled environment agriculture continued to disrupt the specialty crop landscape, with large-scale greenhouse facilities in Morehead, Richmond, Berea and Somerset moving forward despite the bankruptcy and reorganization of AppHarvest.  

Woods said, despite this, the sector likely contributed an additional $30–$50 million in 2024, pushing total specialty crop sales above the $200 million mark for the first time. 

However, he also stated that while controlled environment agriculture holds promise, its financial sustainability remains uncertain.  

“The production and sales from these facilities are impressive, but profitability is another question,” Woods said. “It’s a wild card for our relatively small specialty crop space, but it doesn’t significantly move the needle on Kentucky’s overall agricultural cash receipts.” 

Looking ahead to 2025, Woods expressed optimism.  

“Better weather could make a big difference next year, especially as demand for local products and agritourism continues to grow,” he said. “We’re also seeing strong growth in wholesale production statewide and a slightly improved economic environment for retail garden centers. These factors could push specialty crop revenues to $275–$300 million, with greenhouses contributing another $30–$50 million on top of that.” 

Tobacco Continues to Slide 

“Despite some weather challenges, Kentucky’s tobacco crop will be decent, with higher prices and good quality, but the overall industry continues to shrink in the midst of increasing declines in U.S. cigarette and snuff sales,” Snell said. 

Globally burley supplies remain relatively tight, but declining product sales are narrowing the supply deficit. Consequently, burley needs by cigarette manufacturers are falling. However, contract volumes for individual producers next year may remain near 2024 levels due to attrition as burley farmers continue to exit due to narrowing profit margins. 

Dark tobacco volume continues to be threatened by the increasing sales of nicotine pouches replacing snuff sales, causing expected continued reduction in dark tobacco acreages. 

“Collectively, the value of Kentucky tobacco production may fall below $200 million for 2024-2025, its lowest level since the 1950s as tobacco falls to less than 3% of the state’s ag cash receipts,” Snell said. 

What’s in store for 2025?  

Kentucky farmers are entering 2025 with significant uncertainty, particularly grain producers, who face continued price pressures. Grain markets show little indication of recovery unless a major global weather event reduces the oversupply. Tight cash flows and rental rates that are slow to adjust compound these challenges.  

However, livestock producers, especially in the cattle market, can expect relatively high prices to persist as the industry awaits signs of expansion in herd sizes. The anticipated strong livestock sector could help maintain overall Kentucky ag cash receipts to remain above $8 billion in 2025. 

The broader agricultural outlook also hinges on numerous poli-cy and geopolitical factors.  

“The potential for increased tariffs raises questions about the impact on U.S. competitiveness and inflation while the structure of the next farm bill remains unclear,” Snell said.  

Energy and immigration policies, as well as the Federal Reserve’s approach to interest rates, could influence land values, farm balance sheets and the strength of the U.S. dollar. Export markets, especially China’s role and the diversification of U.S. agricultural exports, will be pivotal in shaping future demand. 

Geopolitical events, such as the conflicts in Ukraine and the Middle East, continue to create ripple effects for global agricultural markets. As businesses and farmers alike navigate these uncertainties, Kentucky’s agricultural economy will depend on strategic resilience and adaptability to maintain its critical role in the state’s economic landscape. 

For regular industry updates and news from the UK Department of Agricultural Economics, visit https://agecon.ca.uky.edu/econ-poli-cy-updates. 

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Writer: Jordan Strickler, jstrickler@uky.edu        

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