Reinventing Kentucky Agriculture
Tobacco settlement money and new marketing strategies fuel an agricultural renaissance

Imagine popping an all-natural pill manufactured in the Bluegrass State that provides a number of the health benefits you’d find in a glass of milk, including Vitamin D and calcium plus a liberal dose of an anti-cancer agent. Or next time you are at the supermarket, picture visiting the fish department and finding a wide selection of filets from Kentucky waters. Better yet, stroll down the vegetable aisle of that same store and discover the colorful array of peppers, strawberries, grapes and other produce grown in the Commonwealth. And don’t forget to stop for a bottle of Merlot produced by a Kentucky vintner.

Wait a minute, you say. This is Kentucky we’re talking about. When you say Kentucky agriculture, you think tobacco and horses, right?

Not any more.

Today, in the wake of a major shakeout in the tobacco quota and a looming multi-billion dollar settlement for tobacco farmers in the Bluegrass – the nation’s No. 2 burley producer – diversity in agricultural production and marketing are not just buzzwords. For a state that places critical importance on farming, innovation in marketing and new crops means business – literally. It also means that farm families have to realize there is a change taking place all across the state, where for generations brothers and sisters and cousins and neighbors all were involved in the annual ritual of planting, picking and drying their burley crops. Now, instead of putting out tobacco plants in the spring, farmers are just as likely to be pruning wine-quality grapes or tending row upon row of lettuce.

The fact is, with tobacco quotas widely reduced, worried farmers have been scratching their heads as they ponder their future. Fortunately, some of the best and brightest in the business have been pondering the same challenges for years. And while the evolution taking place in the agricultural universe here seems daunting, it also offers unique opportunities to those willing to take a chance on new products and new technologies, according to Billy Ray Smith, Kentucky’s Commissioner of Agriculture.

Evoking the image of families working together putting out their tobacco crop, Smith notes one of the biggest challenges to farming in the Bluegrass is that “the tobacco culture is changing, to a certain extent even going away. Now we’re scrambling to find diversification with new products and new markets for those products.”

In a Commonwealth that boasts more family farms than any other state east of the Mississippi River, the loss of a critical source of revenue has forced small-scale farmers – the vast majority of whom operate their agribusiness as a part-time proposition – searching for new tactics to develop and grow farm revenue.

At the state level, the front line of that new tactic is occupied by the Kentucky Agriculture Development Board, which continues to oversee the Year-2000 fund created by the Kentucky Legislature to target tobacco settlement revenues for agricultural diversification. The result of the three-year blitz by the board has been a tremendous growth in interest in “new” agriculture ventures such as fruit and vegetable production, aquaculture projects that are bringing Kentucky catfish to consumers throughout the Southeast and Midwest, and a renewed concentration on cattle and dairy production. The Board’s plan, Smith said, is to adhere to the three main principles of sustainable development: Adding value to local agricultural products, exploiting market niches for specialty food products and promoting Kentucky’s rural landscape as an important asset.

Indeed, farming experts throughout the state are gearing up with agricultural innovations in anticipation of what is expected to be the lion’s share of a multi-billion dollar tobacco settlement, according to William M. Snell, extension professor of agricultural Economics at the University of Kentucky.

“There are farmers throughout the state who are looking to diversify their operations,” Snell said. “What’s happening now, though, is that many farmers have not completely shifted away from tobacco. Everybody is keeping their eye on the proposed buyout.”

Snell explained that the buyout, funded by the tobacco giants and the government, ultimately will compensate current tobacco-quota owners and growers and will provide some transition money so farmers can explore new agricultural projects. It also likely will provide retirement money for many farmers who will pack it all in once settlement money is made available, he added.

But the waiting game for settlement money also has had a negative effect recently as many farmers have slowed or completely halted production on their land until they see when and how much they might receive, Snell said.

“I think the political environment is right for something to happen with the settlement in 2003,” he said. “We have several Congressional leaders sitting in key committees from agricultural states,” including Kentucky’s Sen. Mitch McConnell. “Some days, I feel 55 percent sure we’ll have something happen this year. Some days I don’t feel that confident. But no matter what, maintaining the status quo is not going to bail out Kentucky’s farmers.”

The good news is that not everyone is caught in this tobacco stasis. Instead, as many farmers look for ways to increase productivity without tobacco, they are discovering a tried and true brand of farming: raising cattle.

“Lots of farmers are either taking on cattle for the first time, or they’re reintroducing livestock to the family farm,” said Tim Wood, associate extension professor in agriculture economics at the University of Kentucky. “It’s not very sexy, and it’s not super-profitable. But for a lot of farmers, it’s the clear option open to them in the short term.”

Wood notes that most farmers in the Bluegrass State are at least familiar with the production process involved with cattle, so there is a comfort level in livestock farming for the embattled agricultural entrepreneur.

“It’s not a tremendously risky business to diversify into, and there are not a lot of additional demands on labor and capital. But, it’s also not for everyone.”

And while Wood says some of the innovations in agriculture here are also not for everyone, they do provide models for farmers who may seek new products in a post-settlement world.

“Lately, I’ve seen more and more farmers moving into what you might call mainstream enterprises,” Wood said. “They are beginning to grow produce and other horticultural products,” some of which can come close to producing tobacco-level revenues of about $1,000-$1,200 per acre. “Lots of folks now understand at last that there is a lot of money to be earned in these kinds of projects. With the addition of new and more effective marketing infrastructure, farmers involved in these new enterprises are reaping substantial rewards.”

Marketing is at the heart of most of the challenges – and opportunities – in Kentucky’s new agricultural landscape. Understanding that the vast majority of farms in the Bluegrass are small, family-run enterprises, Wood explained that the introduction of marketing cooperatives mean the difference between success and failure in innumerable new endeavors.

“There are some really great things going on out there with these cooperatives,” he said. In Owensboro, a growers’ cooperative has concentrated on growing sweet corn, selling the product by the crate to a group based in Florida and Georgia. The cooperative makes the market contacts, sets growing and production standards and ensures that the product gets to the customer, Wood said. And while about 60 percent of the Owensboro co-op growers business is in sweet corn, other enterprises involving broccoli, peppers, squash and other vegetables are thriving as well.

The Green River Produce Co-op, another of the state’s four major cooperatives, currently has a marketing alliance with a Florida operation: The Green River members grow cantaloupe and some cabbage. In central Kentucky, another cooperative has had a great deal of success selling green peppers.

“Interestingly, a lot of farmers are finding that vegetable production is highly labor-intensive, but they already have the skills necessary to complete the production process,” Wood added.

Then there are the fish farmers. One group, the Purchase Area Aquaculture Cooperative, has between 50-75 farmers involved in catfish production.

“These guys have come down with their feet on the ground,” Wood said. “They have been very successful marketing their product, and recently they completed a deal to sell their fish to several Kroger food stores in Kentucky, Ohio and Indiana.”

The lesson: Forming agriculture alliances is marketing magic in the Commonwealth.

“Cooperatives are clearly the way to go,” Wood said. “Because we have so many small farmers throughout the state, it becomes difficult to find a replacement product for tobacco where you can make up the kind of money that was lost. Cooperatives allow the small guys to get to market quickly and efficiently. Innovation is always the keyword for us today.”

Innovation also comes in terms of product development.

In Glasgow, Billy Joe Williams understands the importance of developing new products and new markets. Seven years ago, Williams and his wife, Debbie, purchased the dry milk/solids plant from Mid-America Dairymen, which had announced its intentions to close shop. Uninterested in the cheese side of the business, which for years had been a drag on the company, Williams focused on the dried milk side of the business. He grew his new company, Glasgow Spray-Dry, into a $30 million-a-year firm with 100 employees and two facilities.

Williams took advantage of a University of Kentucky trade delegation to Cuba, where “we had the opportunity to set up a booth to show our products. We were able to sit down with purchasing people in Cuba, and we made some significant sales.” Noting that agriculture is one milieu the United States government will allow to have transactions with Cuba, Williams said his company was able to establish what he called “long-term relationships” with purchasing managers in the Caribbean nation. Now, Williams and Glasgow Spray-Dry continue to look south for customers. Currently, products from the company are being demonstrated in Mexico and Brazil, and he said some dried cheese powders were being shown as far away as the Philippines and China.

But ask Williams what really gets him excited these days and he’ll tell you about a new diet. For cows.

University of Kentucky dairy scientist Sharon Franklin recently developed a diet for dairy cows that increases the levels of cancer-fighting conjugated linoleic acid. Her method, which Williams said is being adopted by several dairy farmers in the Bluegrass, increases tenfold the CLA in milk, potentially making dairy products a weapon in the arsenal against the dreaded disease.

“We’ve taken her idea and done some tests with milk,” Williams said. “We’ve developed a sweet cream powder with the elevated CLA levels. Our thinking now is that we might be able to develop a powder that can be put into a capsule that the consumer will gain health benefits from.”

“I’m optimistic about agriculture in the coming decade,” Wood said, commenting on Williams’ innovation with CLA. “I think the change in the tobacco quota is forcing a lot more emphasis on new product development. We’re seeing things like interesting partnerships between agribusiness companies looking at some of these natural products like an Owensboro grower who produces organic soy beans.

“We’re going to see more and more highly specialized products requiring specialized processes that will allow our Kentucky farmers to operate very profitably,” he said. “It won’t happen overnight, but I’m confident that it will happen.”

Dennis O'Conner is a staff writer for The Lane Report.
editorial@lanereport.com

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