Call to Order and Roll Call
The 6th meeting of the Interim Joint Committee on Agriculture was held on Wednesday, November 9, 2016, at 1:00 PM, in Room 171 of the Capitol Annex. Senator Paul Hornback, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Paul Hornback, Co-Chair; Representative Tom McKee, Co-Chair; Senators C.B. Embry Jr., Chris Girdler, David P. Givens, Stan Humphries, Dennis Parrett, Dorsey Ridley, Damon Thayer, Robin L. Webb, Stephen West, and Whitney Westerfield; Representatives Lynn Bechler, Denver Butler, Mike Denham, Derrick Graham, Richard Heath, James Kay, Kim King, Michael Meredith, Suzanne Miles, Tom Riner, Bart Rowland, Steven Rudy, Dean Schamore, Wilson Stone, James Tipton, Tommy Turner, and Susan Westrom.
Guests: Dr. William Snell, University of Kentucky, Jerry Pierce, Kentucky Farm Business Management Program, Mark Haney, Kentucky Farm Bureau, Dave Maples, Kentucky Cattlemen’s Association, and Commissioner Ryan Quarles, Kentucky Department of Agriculture.
LRC Staff: Lowell Atchley, Kelly Ludwig, Marielle Manning, and Susan Spoonamore, Committee Assistant.
The October 7, 2016, minutes were approved by voice vote upon motion made by Representative Stone and second by Senator Thayer.
Reports from Subcommittee on Horse Farming and Subcommittee on Rural Issues
The Subcommittee on Horse Farming report was approved by voice vote upon motion made by Representative Turner and seconded by Senator West.
In response to Chairman Hornback, Representative Kay stated that there is a high legal standard and burden of being able to declare horses as abandoned.
The Subcommittee Report on Rural Issues was approved by voice vote upon motion made by Senator Humphries and seconded by Representative Denham.
Agriculture Economic Outlook
Dr. Will Snell, Agricultural Economics, University of Kentucky, discussed the economic outlook for agriculture. He said agriculture has global connections which can impact U.S. agriculture depending on climate and political conditions. He said that the agriculture sector is slow to adjust to changes which has slowed down the industry. Dr. Snell said The United States Department of Agriculture (USDA) estimates that the national net farm income will be down approximately 10 percent for the year and 40 percent less compared to a couple of years ago. He said that some farm expenses are lower such as interest and feed costs. Dr. Snell said that exports are also falling but should improve next year. He said that in 2015 Kentucky agriculture cash receipts fell to $5.8 billion. In looking at 2016, he predicted Kentucky agriculture cash receipts could fall to $5.5 billion. Future issues facing agriculture are competition and concentration in the markets as well as the political fallout pertaining to increasing interest rates. Kentucky agriculture is in the middle of a downward cycle, but it should slowly rebound. Dr. Snell noted that the one positive that affects everyone is the price of food. Food prices are deflated, which benefits consumers.
In response to Representative McKee, Dr. Snell said tobacco is a supply driven market and cigarette consumption continues to fall. Some of the buyers have set up a buying station looking for good quality tobacco.
In response to Senator Parrett, Dr. Snell said that there are some situations with a lot of concentration of beef cattle. One of the issues driving the beef cattle market down is the low prices of protein products such as poultry and pork.
In response to Chairman Hornback, Dr. Snell agreed that in the 1990s, a total of 37 cents out of a dollar was returned to the farmer and now a farmer receives 17 cents out of a dollar. He said that consumers eat out more, like convenience packaging, and marketing costs have eaten into the farm value. Americans now spend less than 10 percent of their income on food.
Jerry Pierce, Program Coordinator, Kentucky Farm Business Management Program, discussed commercial grain farms. He said grain is the bread and butter for agriculture. In 2013, Mr. Pierce stated that the average net income for a grain farmer was $544,000. Toward the end of 2013 the market had dropped to $173,000. For 2016, projections look to be around $110,000. For grain farmers in particular, the net farm income loss is projected to be 20 percent. Farmers are trying to make adjustments to their expenses but the income is falling faster than the expenses. The next step for some grain farmers would be to restructure their debt load, lower their costs, find other ways of increasing income, or look for another lender. Mr. Pierce said that for the average grain farmer, they might be able to make it one more year unless prices increase.
In response to Chairman Hornback, Mr. Pierce said that the investment in equipment at the beginning of 2015 was $1.4 million and the prediction is that it will decline to $1.3 million. Investments are going down because farmers are not purchasing equipment or the equipment is depreciating. Mr. Pierce agreed that before 2015, the value of equipment was high. Now the equipment has devalued by 20 to 30 percent in a year’s time because of the decrease in commodity prices. Farmers are hanging on to their equipment for longer periods of time.
Representative Denham said that in his area farmers are past refinancing and are starting to sell off parts of their farm. Once that farmland is sold, more than likely it won’t be put back into production.
In response to Representative Denham, Mr. Pierce said that he has not seen that happening yet. Although some of the farmers they work with have decided to retire.
In response to Representative Tipton, Mr. Pierce said that the program works with approximately 400 farmers. He said 335 farms are identified as single units or operations. The average age of the farmers participating is younger than the national average.
Legislative Issues for 2017 Regular Session
Mr. Mark Haney, President, Mr. David Beck, Executive Vice President, and Mr. Jeff Harper, Legislative Affairs, Kentucky Farm Bureau (KFB), appeared before the committee. Mr. Haney said that KFB will be focusing on and gathering information regarding the 2017 Farm Bill. KFB’s legislative agenda would be ready around the first week of December. The most common issue among KFB members was how Kentucky manages wildlife such as deer, turkey, black bears, elk and other animals. KFB Insurance spends approximately $25 million annually on animal strikes and that number is on the rise for 2016. If tax reform is discussed during the 2017 Regular Session, KFB would be willing to work on issues regarding tax reform based on sound economic principles. Kentucky Farm Bureau has strong opinions on agriculture sales tax and exemptions and also the way agriculture real estate is taxed. KFB would also like for the 22.2 percent tax allocation for rural roads to continue.
In response to Representative McKee, Mr. Haney stated that an educational element is probably warranted to help explain the purpose of HB 44, enacted in a 1979 Special Session. Kentucky Farm Bureau has the ability to communicate the information to its members, he said.
In response to Representative McKee, Mr. Haney stated that more work is needed on the nuisance wildlife bill. There is an issue with black bear destroying personal property, and beehives can devastate an orchard business.
In response to Representative Stone, Mr. Haney stated that Kentucky Farm Bureau has approximately 475,988 members. There are about 71,000 farmer members. KFB has the fourth largest membership in the nation.
Representative Turner stated that one problem with the increasing bear population is the fact that there is a lot of land that has been leased to out-of-state people. The lessees refuse to let anyone hunt on the property which includes bear hunting. Therefore, the bear population is growing and they are causing more and more problems for surrounding landowners. He recommended that new laws or regulations be instituted to help solve the issues, especially to help the Kentucky Department of Fish and Wildlife enforce and control the increasing bear population.
Senator Webb agreed, stating that obtaining access to some properties in order to hunt and manage the bear population is a real problem in the northeastern part of the state.
Mr. Dave Maples, Kentucky Cattlemen’s Association, discussed concerns regarding the purchasing of veterinarian products locally, an apparent reference to the assessment of sales taxes. He decided to order products on-line because the prices were cheaper. As an example of falling cattle prices, he noted that in June of 2015 he sold 10 head weighing around 644 pounds for $1,592.62 per animal, and this past June, he sold 10 head and received $995.00 per animal. That is a major money difference for farmers which will negatively impact the farmer, the community and the state, according to Mr. Maples.
In response to Senator West, Mr. Maples stated that the Chicago Board of Trade eliminated the “pit” and changed over to electronic high frequency trading. There are some harsh feelings that the change-over was responsible for the falling beef cattle prices. Several farmers met with some of Kentucky’s congressional members and it turned out to be a very positive meeting that brought about some changes to the Chicago Mercantile Exchange. There are several other meetings scheduled to discuss the concentration of packers and other issues facing the beef industry.
In response to Representative Tipton, Mr. Maples stated the import of Brazilian beef had not been the cause of the downturn in the market but exports from Australia and New Zealand made more a difference.
Commissioner Ryan Quarles, Kentucky Department of Agriculture, said that tobacco took a beating this year, grain yields were down, and there could be a hay shortage. It is important for farm groups to start a conversation regarding issues for the 2018 Farm Bill. Kentucky will be playing a role in the structure of the Farm Bill. The department was tackling technical issues particularly with China regarding the horse industry. The department is looking at what it can do at the state level with entering emerging markets in Europe, the Pacific Rim, and Cuba.
The Kentucky Proud Program recently submitted its application to the Agricultural Development Board for funding consideration. Commissioner Quarles stated that the department, along with the Farm Bureau and Farm Service Agency, will be hosting a Young Farmer’s Summit in Louisville in the following week.
As to legislative issues, Commissioner Quarles discussed making changes to the current language of the hemp statutes in order to realign Kentucky statutes with the new federal requirements. The department also has plans to make revisions to the amusement rides statutes. The commissioner stated that the department is looking to make some revisions to enforcement and collection of fines. The Task Force on the Hunger Initiative had been working on developing statewide policy goals. When legislators are ready to take up tax reform, the department will be willing to work with the General Assembly on tax issues pertaining to the farming community. The poultry industry is continuing to grow, and growth should bring in $2 billion annual revenue to the Commonwealth.
There being no further business, the meeting was adjourned.