LEXINGTON, Ky. — While 2024 provided a mixed bag of economic factors resulting in a projected slight 3.3 percent 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 percent in 2024, we are projecting that Kentucky livestock receipts will increase by around 17 percent 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. 

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 percent 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 percent, 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 percent 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. 

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 receipts are expected to surge by 16.8 percent 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 percent, 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. 

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

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.  

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 policy 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.