The Importance of Agriculture for Kentucky 2007
Alison Davis, Ph.D.
Department of Agricultural Economics
The University of Kentucky
Agriculture in Kentucky consists
primarily of the livestock industry
including, poultry, horses, and beef
cattle. As of 2007, the horse industry
made up roughly 19.7% of the
agricultural production in the state.1
Figure 1 provides a summary of
farming in Fayette County. Overall
the number of farms has gone down
since 2002 but the market value per
farm has increased by 59%. In
addition, Table 1 provides an
overview of the top commodities
produced, in terms of market value
of sales, in the state.
85,260 farms, down 1% from 2002
13,993,121 acres of farmland, up 1%
164 average acres per farm
Market value per farm: $56,586, up 59%
Figure 1 Overview of Fayette County Agriculture
Table 1 Top Agricultural Commodities in Kentucky
Commodity
Poultry
Horses
Cattle and Calves
Grains
Tobacco
Value of Sales 2002
$561 Million
$491 Million
$622 Million
$518 Million
$404 Million
Value of Sales 2007
$978 Million
$952 Million
$936 Million
$867 Million
$314 Million
To determine the value of agriculture in Kentucky we will use an input-output (IO) model
with 2007 IMPLAN data. The IO model provides us several key pieces of information.
Three different types of multipliers are derived. These multipliers give us an indication
of the impact of an industry on employment, output, and income on the local economy.
Multipliers measure the total change throughout the economy from a one unit change for
a given sector. While there are several types of multipliers, the Type II multiplier is most
widely used in IO analysis. A Type II multiplier includes the effect of direct or initial
spending, indirect spending or businesses buying and selling to each other as well as it
includes household spending based on the income earned from the direct and indirect
effects. Essentially, these latter induced effects represent employees spending on goods
and services.
1
Census of Agriculture, 2007.
1
Table 2 provides an overview of the market value for agricultural products in the State of
Kentucky. The industries have been divided into production agriculture which would
include all of the markets from Table 1 along with all other crops and livestock. The
agriculture processing industry includes anything that would utilize crops and livestock
as inputs to a final product. For example, frozen vegetable production would be a
component of agriculture processing. In addition, we have also included statistics for
other industries that might use agricultural products in manufacturing. For instance, we
included information on apparel, leather, and packaging. It is important to note that we
are unable to disaggregate these sectors into those industries that use either agricultural or
non-agricultural inputs, thus these numbers are likely inflated compared to agriculture’s
role in these industries.
Finally, agriculture inputs would be anything aside from crops and livestock that would
be used as inputs to agriculture production or processing, for example, fertilizer would be
an agricultural input. In 2007, total revenue for production agriculture was $5.68 billion
and employed just fewer than 100,000 workers. In addition, agriculture processing
collected revenues of approximately $17 billion and employed 27,985 workers. Total
output for the entire agriculture industry topped $24.5 billion and employed 136,416
workers. Agricultural output is approximately 7.5% of total revenue in the state of
Kentucky.
Table 2 Agriculture Direct Effects on Kentucky Economy
Agricultural Industry
Output*
Employment
Value-Added*
Oilseed and Grains
$867,298
23,434
$402,625
Vegetables
$20,937
216
$10,422
Fruit and tree nuts
$3,088
172
$104
Greenhouse, Nursery, & sod
$87,748
1,231
$45,994
Tobacco
$314,151
9,212
$80,321
All other crops
$978,025
4,588
$391,882
Cattle ranching
$935,611
8,613
$171,023
Dairy Cattle
$250,305
3,294
$101,527
Poultry/Egg production
$978,025
2,947
$204,003
Animal production (other)
$1,253,170
45,367
$669,042
Total Production Ag
$5,688,358
99074
$2,076,943
Ag Processing
Apparel
Leather
Packaging
Ag Inputs
Total Related to Ag
Total all KY industries
% Ag
* Thousands of dollars
$17,141,625
$106,589
$52,923
$1,206,181
$286,534
27,985
584
2979
5,000
794
$5,152,119
$29,581
48,353
$403,062
$72,916
$24.5 Billion
$324.6 Billion
7.5%
136,416
2,401,511
5.65%
$7.7 Billion
$150 Billion
5.1%
2
Table 3 provides values for the three multipliers (output, employment and value-added)
for three defined aggregate industries of agriculture. The output multiplier is often used
to describe the “turnover” of the dollar. For every dollar increase in sales, the multiplier
tells us how many additional dollars are generated. The employment multiplier is defined
as the number of new jobs created when the agricultural sector realizes a 1 employee
change.
An Example: Let’s look at the tobacco industry. The output multiplier is equal to 1.67.
This means that for every dollar spent in the production of tobacco, an additional 67 cents
is generated as a result of interactions between business, suppliers, and household
spending. The employment multiplier is equal to 1.28. This number suggests that for
every new job in the tobacco industry, through direct, indirect, and induced effects, an
additional 0.28 jobs are created throughout the rest of the local economy. The income
multiplier is equal to 2.45. For every $1 of income generated, there is an additional $1.45
of income generated within the local economy. It is important to note that the indirect and
induced effects are not constrained to the agricultural industry. Depending on the
relationships between the different industries and household spending, the spillover
effects can be felt almost anywhere.
Table 3 Economic Multipliers for Agricultural Industries
Agricultural Industry
Output
Employment
Multiplier
Multiplier
Oilseed and Grains
1.60
Vegetables
1.87
Fruit and tree nuts
2.24
Greenhouse, Nursery, & sod
1.83
Tobacco
1.67
All other crop
1.74
Cattle ranching
1.98
Dairy Cattle
1.46
Poultry/Egg production
1.71
Animal production (other)
1.55
1.27
1.96
1.90
1.58
1.28
1.88
1.75
1.35
2.96
1.18
1.71
1.96
1.00
1.84
2.45
2.00
3.19
1.56
2.54
1.52
Ag Processing
Apparel
Leather
Packaging
Ag Inputs
4.45
1.85
2.48
1.96
2.07
2.05
2.07
3.49
1.78
2.07
1.74
1.62
2.05
1.54
1.64
Income Multiplier
Table 4 provides the final estimate of the overall economic impact of agriculture on the
state of Kentucky. Including the multiplier effect, production agriculture represents
approximately $9.7 billion of output, 134,649 jobs and just over $4 billion in income.
Including the other agricultural-related industries, agriculture is responsible for $42
billion of output, 270,000 jobs and $15.5 billion in income.
3
Table 4 Direct, Indirect, and Induced Effects of Agriculture on Kentucky Economy
Agricultural Industry
Oilseed and Grains
Vegetables
Fruit and tree nuts
Greenhouse, Nursery, & sod
Tobacco
All other crop
Cattle ranching
Dairy Cattle
Poultry/Egg production
Animal production (other)
Total Production Ag
Ag Processing
Apparel
Leather
Packaging
Ag Inputs
Total Related to Ag
Output*
$1,387,677
$39,152
$6,917
$160,579
$524,632
$1,701,764
$1,852,510
$365,445
$1,672,423
$1,942,414
$9,653,512
Employment
Value-Added
29761
$688,490
423
$20,428
327
$104
1945
$84,628
11791
$196,786
8625
$783,764
15073
$545,563
4447
$158,383
8723
$518,167
53533
$1,016,944
134649
$4,013,256
$29,826,428
$172,674
$108,492
$1,857,519
$469,916
124533
1080
7388
9800
1644
$10,561,844
$61,233
$29,152
$717,450
$150,936
$42.1 Billion
270,094
$15.5 Billion
4