Emerging Trends in Kentucky Agriculture and the Future of Rural Kentucky in the 21st Century

David L. Debertin

David L. Debertin is Professor of Agricultural Economics at the University of Kentucky. Appreciation is extended for comments on this paper by Craig Infanger and Tim Woods. The views represent those of the author.


As those living in rural Kentucky look forward to the 21st century, it is becoming increasingly clear that the economic environment will continue to change radically. The future of tobacco, long the leading cash crop for the farmers in the Commonwealth, looks increasingly bleak, as federal officials renew efforts to further regulate the sale and use of tobacco products. Rural Kentucky will not likely continue to rely on income from tobacco production into the 21st century to the extent it was important during the last three decades of the 20th century. The purpose of this paper is to examine some emerging trends in Kentucky agriculture and the rural economy as we embark on the 21st century, and offer some suggestions as to the changing nature of the leadership role the College of Agriculture might assume.

Emerging Trends in Kentucky Agriculture

1. Declining Role of Many Commodities Traditionally Important to the State's Agriculture.

In Kentucky, income from the sale of crops and livestock fluctuates significantly from one year to the next. In recent years, the trend has again been moving upward. Still, it is likely that income from the sale of output from enterprises that have traditionally been important to the agriculture will decline relative to the overall gross output of the state's economy, as the manufacturing sector expands at a more rapid pace.

2. Increasing importance of Alternative Commodities.

Discussion has appeared in the media about the potential role for various alternative commodities--including horticultural crops and similar enterprises--which would likely be grown and marketed under very different systems from those used to produce and market traditional (unbranded, graded or generic) crops and livestock output. Any of the horticultural crops thought to be alternatives to tobacco production will likely be produced and sold in small dollar volumes relative to the historic value of tobacco production. For individual producers, these alternative commodities may represent opportunities, but potential sales are small when compared with the approximately billion dollar output arising from the state's tobacco production.

3. Increasing Importance of Commodities Grown Under Contract in an Industrialized Agriculture

. The other possibility that has generated considerable public interest is the current and future potential of the state to produce and process broilers, and, later, perhaps, hogs, under contract. Even a single broiler processing plant is capable of producing a huge dollar value of output. In North Carolina, a small number of factory-style hog operations mean that the state is now producing hogs in volumes comparable to the value of hogs grown in the big hog-producing states. So changes in the state's agriculture can occur rapidly under these conditions both in the kinds of products that are produced and in the size and number of the farming operations that produce them.

4. Income Redistribution an Environmental Issues Associated with an Industrialized Agriculture

. The problem, of course, is that a state with an agriculture dominated by a comparatively small number of large-scale hog and broiler operations is a very different place from a state in which the agriculture is dominated by a large number of small-scale tobacco producers and income is widely dispersed. Impacts on the environment and on the distribution of agricultural income within the state are two important concerns. This alternative structure of agriculture has implications for the College of Agriculture at the University of Kentucky as well with respect to the appropriate human resources best needed to serve agriculture within the Commonwealth as we move into the 21st century and calls for additional research and extension personnel devoted to these issues.

5. Potential for Industrial Hemp.

Those advocating the legalization of growing industrial hemp and the production of hemp as a cash crop within Kentucky have been very vocal. There are two issues of concern in hemp production. First, hemp is illegal to grow in the US, and, from the perspective of law enforcement officials, there are good reasons for this. Current methods for identifying illegal marijuana crops rely heavily on helicopter surveys and sophisticated techniques which are capable of determining the kind of crop being grown by its appearance from the air. Despite the fact that the industrial hemp has a very low percentage of the active chemical in marijuana, THC, it would be comparatively easy to hide marijuana plants among the industrial hemp plants, and it would be difficult if not impossible to distinguish between the two via aerial surveys. Given the high value of marijuana relative to the value of industrial hemp, strong economic incentives would tend to encourage some producers to attempt to do this. Hence, it is unlikely the federal government will change current law and make industrial hemp production legal. Hemp advocates have argued that intermingling marijuana plants with industrial hemp results in a deterioration in the quality of the marijuana, but even if this were true, there remains the problem of detecting illegal marijuana from potentially legal industrial hemp fields.

Second, prices cited for industrial hemp are based on current worldwide supply and demand conditions, based on the crop being legally grown only in some countries. While additional production may trigger the development of some new uses for industrial hemp, it is difficult to see how the market might absorb a significant increase in supply without some significant downward price pressure. Further, for Kentucky to successfully compete against other states in hemp production (assuming the crop were made legal and initially found to be quite profitable for Kentucky farmers), this state would have to possess some peculiar intrinsic comparative advantage that would make farmers in other states unlikely or unable to grow the crop if the profitability of the crop were to continue. What this comparative advantage might be is unclear, although some advocates have argued that Kentucky climate is well-suited to industrial hemp production. All of this suggests that it is unwise for farmers in Kentucky to hope that industrial hemp will be a panacea for declining tobacco revenues in the future.

6. The Future Role of Tobacco

. Events of recent months indicate that the tobacco industry--from production of the raw commodity to the retail sale of tobacco products--will continue to face numerous challenges. These challenges will likely continue to jeopardize the current major role of tobacco in the state's agricultural economy, and force many rural Kentuckians to look elsewhere for new sources of income, whether that income comes from on-farm or off-farm employment.

These challenges will come from many directions. Potential financial liabilities arising from the health-related lawsuits now being argued will pose an increasing threat to the continued profitability of the major tobacco product manufacturers. Efforts to limit the access by teenagers of tobacco products, if successful, will likely have significant long-term negative impacts on domestic sales of these products: if unsuccessful, the likelihood of direct federal regulation of tobacco products as drugs increases. Either way, the industry loses. And, as the use of tobacco products is banned in more and more locations, and as fewer and fewer stores sell cigarettes because of regulations governing sales to minors, domestic consumption will likely decrease. In addition, potential national health insurance reforms, the continuing debate over the health impacts of second-hand smoke, and continuing trends toward smoke-free public areas in public buildings, shopping malls and in other places will each have adverse impacts on domestic cigarette consumption.

Many tobacco producers and tobacco product manufacturers are hoping that international sales, particularly increased demand from developing Pacific-Rim countries, will more than offset any decline tobacco used arising from decreases in domestic sales. That this will indeed happen is not at all clear. The major tobacco manufacturers, as reported in the news media, even now are facing increased pressure for regulation in many international markets (China included) because of health-related concerns. Furthermore, the tobacco product manufacturers are multinational companies, and the equipment needed for large-scale production of tobacco products can be readily set up in any country where the demand is present.

Kentucky burley producers take pride in a top-quality crop for world markets. But the multinational tobacco producers are concerned about profitability for shareholders. If, in order to open new markets in a developing country for the sale of tobacco products, agreements to acquire a significant share of tobacco from the that country's farmers are required, manufacturers will be quick to do this, quietly reducing the share of burley purchased from Kentucky producers. If Kentucky burley producers expect to satisfy a significant share of potential increases in world-wide demand for burley tobacco, they mist be price- competitive.

The tobacco manufacturers and Kentucky tobacco farmers have had a shaky coalition in the last few decades because their interests--primarily that of responding to and attempting to protect the tobacco industry from outside criticism--coincided. There is no reason to believe that tobacco products manufacturers will continue to purchase tobacco from Kentucky producers if the best interests of their corporate shareholders are served by purchasing tobacco from farmers located in or near the country where the cigarette sales are being made. In addition, many of these countries, with ultra-low labor costs, are better positioned to assume a comparative advantage in tobacco production than are Kentucky tobacco producers.

New Alternatives: Is Rural Development A Solution?

Despite all this gloom and doom, is it still possible for Kentucky to have an increasingly vibrant rural economy as we head into the 21st century? I believe that it is. I would argue that the state's rural economy, and the University of Kentucky--a university that serves all the people of the Commonwealth--will both face numerous challenges as we move into the 21st century.

The state's rural economy might place considerably less emphasis of the production of the traditional, generic agricultural commodities in the future than was true in the past. Agricultural production, to the extent that it continues, will increasingly be dominated by farmers willing to produce products under contract for specific agribusiness firms who need products with specific sets of characteristics--that is, the approach now employed in broiler production will increasingly spread to other agricultural products. Branded and differentiated agricultural products designed to meet a particular consumer need, not graded generic commodities, will assume increasing importance within the state's agriculture. I envision a coalition of farmers and agribusiness firms working together in order to accomplish this.

For the combination of farming income and off-farm employment to provide an adequate standard of living for many Kentucky families living in rural areas, off-farm employment opportunities in rural areas must continue to expand. In the last decade, Kentucky has made considerable progress in expanding off-farm job opportunities in rural areas, but these efforts must continue. Off-farm employment opportunities may increased not only by attracting new firms that need employees, but by expansion of employment within existing firms already located with the rural area. For many rural communities nationwide, employment expansion within existing firms has become more important than gains in employment achieved by attracting new firms. In addition, fewer public-sector costs (such as tax breaks) are usually incurred when firms are being expanded than in situations where an attempt is being made to attract a new firm.

There will likely be decreased reliance on income from the sale of crops and livestock in most rural areas, while off-farm employment opportunities too (in the agricultural and the non-agricultural sectors) must improve. States such as North and South Carolina are far ahead of Kentucky with respect to the role that industrialization plays in the rural economy. North Carolina, several other tobacco-producing states have been more successful than Kentucky in moving to diversify their agricultural economies away from a heavy dependence on tobacco.

In the absence of strong rural development efforts, structural changes in Kentucky agriculture leading to decreases in the farm population could adversely affect the non-farm rural economy as well. Can Kentucky too move forward in this area? A lot depends on the willingness of the state's agricultural and economic leadership to press forward in new directions instead of simply defending the short-run interests of producers which often reflects the status quo. We must recognize that as we move into the 21st century, the economic structure under which the state's rural economy has traditionally survived is changing dramatically, and this calls for leadership aimed at redirection and the redeployment of the state's resources, both human and physical.

A Continuing Leadership Role for the College of Agriculture

The College's human resources have traditionally been balanced in favor of the commercial farming interests within the state. Changing times suggests an increasing need for refocusing, re-balancing and redirecting efforts to better enable the College to provide the leadership and assistance necessary for improving the well-being of Kentuckians and increasing the vibrancy of the state's economy.

The University of Kentucky College of Agriculture must continue to assume and develop a leadership role in this respect. The College of Agriculture exists to provide services and benefits to all Kentuckians, not just the various groups of producers of specific commodities. Attempts by the College to defend the status quo in an effort to protect the apparent short-run interests of producers politically important for funding and political support are not going to accomplish the broader objectives aimed at improving the lives of all Kentuckians. When the short-run interests of a special interest group run counter to the broader interests of the public at large, the College must always make choices and offer recommendations consistent with the broader public interest. This is true regardless of how politically important a particular special interest group might be in their support for funding of the College.

The College is charged with a broad responsibility to attempt to do good on behalf of the public's best interests wherever and whenever possible, and to never make a recommendation or assume a position that would cause harm to anyone, whether it involves the use of potentially harmful pesticides by producers, the use of tobacco products by consumers, or even issues involving diet and nutrition. Further, the College has a continuing obligation to assume a leadership role on the public's behalf.

The College must continue to speak out as the great issues affecting the lives and the well being of the state's residents are being debated, and must actively seek out and promote solutions that protect and improve the health and the well being of the public at large, regardless of the short-run impacts on special-interest groups. This is true whether or not these positions and recommendations might have negative short-run implications for funding support. We dare not deviate from this task.

Links to Related Internet Writings by the Author

"Kentucky Agriculture in the Year 2000:Some Thoughts on Revitalizing the Mission of the College of Agriculture at the University of Kentucky"

"A Comparison of Social Capital in Rural and Urban Settings"

"Agricultural Sustainability and Consumerism"

"New Strategies for Effective Rural Development"