Farm Financial Situation For 2004
U.S. with Emphasis on Kentucky

The financial situation on many U.S. and Kentucky farms improved dramatically during 2003. Net farm income, one typical measure of profitability, is expected to top $55 billion, more than a 58% increase from the disappointing 2002 figure. This level of net farm income would be about 18% above the average of the past decade. Several reasons underlie the improved situation.

1. Most commodity prices were stronger in 2003, particularly grains, oilseeds and cattle.
2. Many areas of the country had improved production levels and this very evident that in Kentucky last year for row crop production including burley tobacco.
3. Government payments were up substantially in 2003 aiding the financial situation and helping improve farmers balance sheets. However, much of this growth was a result of the shift of 2002 direct payments into calendar year 2003.
4. Farmland prices continued to increase helping fuel stronger balance sheets overall.

How is 2004 shaping up with an emphasis on Kentucky? While no one can say with any degree of certainty, let's look at a few key trends:

1. Last year input costs nationally increased about 6%. Production expenses in 2004 will likely increase at a somewhat faster rate. This will be particularly true for energy-derived products such as fertilizers, fuels and chemicals. In addition, interest rates will likely be under some upward pressure as 2004 unfolds increasing the cost of borrowing money.
2. Revenues are somewhat more difficult to forecast given the uncertainty of what kind of growing conditions will exist in Kentucky, in the U.S. and around the world during 2004 as well as price levels. But given what we hope is "normal" weather, we do expect continued strength in grain and beef prices compared to the average of the past 10 years. Even burley tobacco is looking somewhat rosier given the recent announced increases in manufacturer intent to purchase burley this year. Continued strength is expected for equine prices.
3. Overall farm cash receipts in Kentucky in 2004 will be strong and we're currently forecasting receipt levels to be near 2003 levels. This implies that 2004 will shape up to be a pretty good year financially for Kentucky’s farmers if we get a little cooperation on weather.

For More Information

For additional information, please contact, Larry Jones.

2004 Situation

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