With the locavore movement on the grow in the commonwealth – everywhere else, too – and public attention increasingly focusing on food and fiber produced for local consumption, it’s easy to overlook the importance of export trade to Kentucky’s agriculture economy.
The fact is, Kentucky’s farm economy is dependent on the export market. More than one-third of Kentucky’s farm cash receipts come from international markets, according Craig Infanger of University of Kentucky Agriculture Economics. He authored a report on the topic in the June 2011 issue of Economic and Policy Update from the UK College of Agriculture’s Cooperative Extension Service.
Kentucky’s agriculture exports reached an all-time high in 2008 with more than $2.06 billion coming into the state’s agriculture economy from direct exports. The global recession in 2009 led to a fall in Kentucky’s agricultural exports to $1.95 billion, but experts believe the downward trend is changing.
“USDA is now estimating that agriculture exports will reach an all-time record high this year, around $137 billion,” Infanger stated in his report. “In fact, in the last year USDA has revised its forecast for agriculture exports upward every three months.”
The soybean industry has captured the largest percentage of Kentucky’s agriculture export market in recent years, nearly a quarter of all ag exports in 2009 when it topped $359 million, according to USDA figures. Kentucky’s burley tobacco industry, however, is perhaps the most dependent on the international marketing for success.
“Seventy-five to 80 percent of Kentucky’s burley tobacco is going overseas,” said Roger Quarles, president of Burley Tobacco Growers Cooperative in Lexington. “As far as looking to the future, with the domestic market shrinking a little bit each year the only choice we have to grow the market for Kentucky burley is internationally.”
Kentucky tobacco exports were $256 million in 2009, nearly a quarter of all U.S. tobacco exports, according to USDA figures.
Traditionally, it has been Kentucky’s equine industry that has led the export market demand for breeding stock, but some of Kentucky’s Angus and Holstein cattle producers also are finding a niche in the international market for breeding stock.
Several state agribusinesses, such as Hallway Feeds in Lexington, have worked to build international markets for their products.
“I would say 10 percent of our total tonnage is shipped overseas, with Canada and Japan being our largest markets,” said Lee Hall, vice president of Hallway Feeds. “We are also shipping into a number of European countries, the Middle East, Asia and the Caribbean, so there are probably 10 to 12 countries we are shipping into out of Lexington on a regular basis.”
The Kentucky Department of Agriculture has an international marketing division to work with producers and small- to medium-sized agribusiness to explore the potential for international marketing opportunities.
“We have had an office in Guadalajara, Mexico, since 1997. This is a joint venture between KDA and Kentucky Economic Development Cabinet,” said Jonathon Van Balen, KDA import/export adviser. “We also work with USDA Foreign Agriculture Service, which has offices in 82 countries around the world, to tap into resources to help Kentucky’s farmers and agribusiness.”
Gov. Steve Beshear has made a public commitment to support creating opportunities to strengthen the agricultural community and provide farmers with increased access to markets, including agricultural export markets.
“Traditional commodities, such as soybeans and the equine industry, have led the export market in the past. I personally don’t believe the export market is limited to any one commodity or product,” said Roger Thomas, executive director of the Governor’s Office of Agriculture Policy. “There are tremendous opportunities out there for Kentucky producers, and we are working with Economic Development and other agencies to identify these opportunities.”
Rising U.S. tide lifts state’s boat
While Kentucky has only a small percentage of overall U.S. agricultural exports, ranking 18th nationally, the growth in American farm exports is playing a significant role in improving commonwealth exports.
“We have to look at the bigger picture to see what is having a direct impact on Kentucky’s beef cattle industry,” said Hal Akers, general manager of Akers Farm LLC, an Angus operation near Lancaster, and owner of Hubble Meats, a processor in Lincoln County. “The export market for beef is better than it has been since the BSE (bovine spongiform encephalopathy) scare in 2003, and the strength of that market impacts the value of every animal that walks through our market.”
In international markets, Akers explained, many of the by-products of an animal, such as internal organs, are sold also, creating value for these products that would not exist otherwise. Along with the international market for by-products, beef exports to Asian markets has an impact on Kentucky producers.
“We handle a lot of source- and age-verified cattle that are specifically qualified for feed export to the Asian marketplace, and those (Kentucky) producers have seen nice premiums,” Akers said. “Almost all the calves in our Internet sale are age- and source-verified, and all of our CPH (Certified Pre-conditioned for Health) cattle that we sell are source and age” verified.
The CPH program, created in the 1980s with the backing of Kentucky’s 44,000 beef producers, has increased the quality and value of Kentucky beef cattle with diet and medical treatment standards that have built confidence among buyers of calves with CPH-45 tags.
While he said he can’t verify that all age- and source-verified animals sold go on to the international market, Akers said the fact that these animals meet the Asian standards do help producers receive a higher price for their products.
The export demand for U.S. beef is just one example of how the prices Kentucky farmers receive at local markets are inexplicitly tied to the international market demand agricultural products.
“As we continue to see the development of typical third world countries, their economies begin to grow; the export market offers tremendous opportunities for Kentucky agriculture,” said Thomas. “Soybeans to tobacco, equine to beef cattle, all will be benefited by our work on developing these export markets throughout the world.”