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Kentucky Horticulture Economic Situation & Outlook 2024
120 Plays1 year ago
In this episode, we have a special guest: Dr. Tim Woods, Agricultural Economics Extension Professor at the University of Kentucky. He will share with us his analysis of the horticulture economic situation and outlook in Kentucky for 2024. What are some of the factors currently impacting the demand and supply of fruits, vegetables, flowers and other horticultural products? What are the opportunities and challenges for growers, marketers and consumers in the coming year? Tune in to find out!
Questions/Comments/Feedback/Suggestions for Topics: hortculturepodcast@l.uky.edu
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Transcript
Introduction to Horticulture Podcast
00:00:02
Speaker
Welcome to Horticulture, where a group of extension professionals and plant people talk about the business, production, and joy of planting seeds and helping them grow. Join us as we explore the culture of horticulture.
00:00:16
Speaker
Hello, what is up? It's cold outside. If it is not January when you were listening to this, then I hope that you are warmer. That is my hope for you right now. But it was zero degrees at my house this morning. So I'm on here today with the regular, the good old crew, the Ray and
Meet Dr. Tim Woods
00:00:33
Speaker
the bald boys. But we also have a wonderful special guest who's going to talk all thing economics with us in an exciting way because he's in ag economics. And we know the best economics are the agricultural ones.
00:00:45
Speaker
So we have Dr. Tim Woods on with us today.
Weather Challenges and their Impact
00:00:48
Speaker
How are you, Dr. Woods? Are you cold? Are you warm? How are we feeling today? Thanks, Alexis. So great to be on with you guys here today. I am cold. It's been cold.
00:00:59
Speaker
frosty January for sure. Yeah. As of recording, there's still, I know, uh, well, I need to ask you guys up here in Georgetown, where I am at, there is a little bit of snow left, but how much snow did Lexington and Alexis going on South where you're at? Uh, how much did you, you guys get as of the, the recording? Yeah. We've had some snow here as of the recording date. I know they have a lot more than my street twice. Yeah. Yeah. There's still snow on the ground. Like, yeah.
00:01:28
Speaker
There's enough snow that I fell and got snow in my pants this morning. Well, there's that doesn't really say that. Yeah, I could be between zero and four inches. It doesn't give us much of a range, Alexis. But the real question is, was there enough snow to make you worried about greenhouses and hot tunnels down where you're at?
00:01:48
Speaker
I went out after kind of the first round of little flurries that we got and took my broom to the top of the tunnel and, you know, just pulled some off just to kind of see what was going on. And there wasn't enough. But if we got any more, if we get then I'd probably be a little concerned. But no, I was like, yeah, it's too cold for this. I'm going inside.
00:02:11
Speaker
I know up this way, it was a dry powdery snow and that always gives me a little bit of assurance that things are going to be okay. Then it gets slippery and then I fall because that's what I did this morning. Because you were out checking plant babies, I bet really early. Yeah, it was zero degrees when I walked outside this morning.
00:02:29
Speaker
And wind chill of negative one. So I went out to check on everything. Negative fun. Negative fun. Negative fun degrees. Yeah. But it's more, I mean, warm, we have a warm spell. It's like 25 degrees here right now.
00:02:46
Speaker
Oh, I know it's wonderful. And our son who is out of school today, he is so upset because the snow is melting. We have a south facing slope on the house acts as the perfect sledding hill. He is not happy. He's angry and I'm staying away from him because it is melting. And I assure him that all the weather forecasters say we're going to have more snow at some point tomorrow. And if that is wrong, I'm going to have to move out.
00:03:09
Speaker
I cannot live here any longer because he is sorely disappointed that we're, that we're losing a snowpack. Yes. I'm calling it a snowpack because it is what it is. We just love that in Kentucky, don't we? Yeah. If you don't like the weather, just wait a few minutes and it's going to change in Kentucky. We're not talking weather today, although we could probably talk for hours about mud season, even in plant world mud season, it's not a fun season.
Kentucky's Horticulture Scene: Growth and Diversification
00:03:35
Speaker
But we are talking about some Aggie Con today. And I'm really excited because I like to know now about all of this, like, I don't know, Tim, Tim is, gets our gold star for our, our guest awards. So sorry to all of our other guests, but he sent us PowerPoint slides to review because he is an expert and.
00:03:54
Speaker
And he's probably listened to our show before, and he knows that we do not stay on topic. He's like, these people are hopeless. They are so lost about everything. But that's why he's here, because we are not great ag economists. And he is. So I'm excited to hear, Tim, all of your horticulture industry updates. I'm pumped. Yeah, well, I think as we talk about the weather forecast, we are going to not necessarily be giving a lockdown forecast, but we will be looking ahead and doing a little outlook
00:04:24
Speaker
for the economic forecast, the economic trends that Tim's been seeing and we've been seeing. I work with Tim in the Center for Crop Diversification at the University of Kentucky, and he's had a really interesting and long
00:04:41
Speaker
diverse career leading to this point, including some extension appointments in different places and different points of focus. So I thought maybe, Tim, everybody across the Commonwealth and beyond seems to know you for one reason or another, but I was wondering maybe if you could just give us the
00:05:00
Speaker
the nickel tour of your journey to this point through working with blueberry growers and your first Extension farm visit and all that kind of fun stuff that we've talked about before. Yeah. Yeah. Yeah. It's been kind of a long, fun journey. I've been here in Kentucky now 27 years working in Extension. One of my very first
00:05:24
Speaker
kind of farm jobs was working on a blueberry farm up in Indiana. Actually thought I was going to be a blueberry farmer really enjoyed that 20 acres of blueberries. Wow, great experience wound up after master's degree going to work with a blueberry farmers co op up in Maine. And that was a really super experience too. And that really kind of gave me the bug for extension and working with farmers and appreciating the
00:05:54
Speaker
marketing challenges especially in Michigan where my granddad was a fruit farmer, where I went to Michigan State for more school still, working with the fruit and vegetable industries up there.
00:06:10
Speaker
Michigan, of course, is a really big center for a lot of large scale commercial horticulture, as you guys know. But then down here in Kentucky, which, you know, you guys know, it's not really historically been considered a major horticulture production state. But as we're going to get into some things here today, long steady growth in innovation and markets and local food opportunities and
00:06:39
Speaker
you know, all the high tunnel growth, the produce auctions, on and on, lots of other kind of innovations that have come into play, especially here in recent years, that has just really helped stimulate a lot of great growth in this industry.
00:06:55
Speaker
You mentioned several things there, and we are in very interesting times, I think, here in Kentucky, because it seems like that I've worked with producers that market at all levels. I mean, small farm stand, they hit the middle markets in that gray area with like farm to school programs, that kind of middle price tier, middle production level. And then there's the wholesale producers, but it seems to be just about as diverse or more diverse than I can ever remember it being in Kentucky.
00:07:23
Speaker
And you said that it was a slow growth. And that's what I've always felt. We've been on this trajectory in Kentucky, whereas maybe some states just north of us or just south of us, they were at a different production level earlier than we were. But we've kind of been on a slow growth curve. And I'm an extension for way more years than I'm going to admit. But it's been fascinating over the years seeing how people produce things and how they get them to market and how they add value.
00:07:50
Speaker
And I know you talk a lot about these topics, you and the others there at CCD, Brett and Josh and others. And it's always fascinating to me where we are in Kentucky now and how we've gotten here. And it's not been real fast, has it? It's like been this slow kind of progression. Yes, exactly. You know, just a few new growers coming here, a few new market opportunities opening there, expanding farmers markets, we saw the
00:08:17
Speaker
I remember the very first produce auction opening up in Hopkinsville, the Fairview Produce Auction back in the late 90s. They were all excited because they had $100,000 worth of sales. And that auction all by itself will pass $10 million in sales this past year. And so we went from one auction to now we have six. And every one of these market channels just seems to have
00:08:47
Speaker
have grown, adapted, and found a place of connection here in this market and community that we've got around Kentucky. It seems like we're a small farm state and I think the state of horticulture being in a
00:09:02
Speaker
a state with a lot of small farms. It kind of speaks to that because, you know, the direct to market outlets and things like that. We're not all wholesale producers here in Kentucky. I know we have listeners outside of the state and you may be in an area that has, it's more typical to have large scale production, but it seems like that's a reflection of the kind of state that we're in and the long history that goes back with agriculture in Kentucky.
00:09:24
Speaker
It just seems to me, it's always been almost like a mirror of that, especially with the state of horticulture now, that we're heating at all levels. You mentioned produce auctions all the way down to the small grower that grows for a farmer's market. Fascinating. I think that's a fair take.
00:09:42
Speaker
We are dominated by very small scale producers, but I think what that has helped us to see emerge in Kentucky is this kind of a market bubble that's been kind of insulated a little bit from the national trends that have actually
00:10:03
Speaker
created a lot of difficulties for the really large scale traditional commercial horticulture spaces.
US-Mexico Agricultural Dynamics
00:10:11
Speaker
Some of the wholesale trends have hit us quite as hard like as a monoculture as a we're not all at the same level of production. Yeah, I've noticed that that I see the wholesale trends and sometimes I don't discount them because they're very, very, very important, especially to our larger producers. But I know that we have a little bit of that insulation.
00:10:29
Speaker
Yeah, I think a big part of that is due to the very strong support we have for local branding, the Kentucky Proud program that's been around for a long time. We've got a very strong certified market program that the Kentucky Farm Bureau has maintained and so a very strong agritourism on farm retail market network
00:11:15
Speaker
project we worked on back during COVID was that actually for some of our markets, whereas other markets were getting hit hard by supply chain issues and ours did too. It actually for many of our farmers market vendors and our produce auctions, it was actually some of the strongest years of sales that they had had on the records to date.
00:11:19
Speaker
And a lot of those folks are sourcing from places like these produce auctions.
00:11:36
Speaker
And I'm thinking, you know, COVID, you don't get much bigger picture than that. Um, but as we, as we think about, I'm just going to keep us in the big picture and then we'll move into some, some details. And I'm going to make sure we talk about the market ready program a little later. Other, other kind of big picture market influences things that, you know, you see as at the highest level. Affecting Kentucky specialty crops, uh, the markets and the producers.
00:12:02
Speaker
Yeah, Brett, you know, I think that's one of the things that I have been watching very closely, especially in the last 10, 10 ish years and it's accelerating is the growth in imports, especially around our fresh produce.
00:12:19
Speaker
A lot of that, of course, is coming from Mexico. We saw this past year the biggest amount of imported produce by value coming into the United States than we have ever seen.
00:12:35
Speaker
And of course, a lot of that is being driven by low labor costs that are there, relatively high labor costs that we're seeing, contrary to that in the United States. And take your pick. In California, you've got water issue, land cost issue, labor access issue, burgeoning population and demand for land.
00:13:03
Speaker
and big traditional places of agricultural production like that that have particularly been the salad bowl of America, so to speak, have been under immense pressure and similar things in kind of different stories going on in places like Florida and in Texas. And so, you know, that's something that we're watching closely and several
00:13:33
Speaker
several crops that we can think of that we grow here in Kentucky, things like tomatoes, strawberries, some other kind of labor intensive crops. Those are things that we have to keep an eye on what's happening with those markets because what we're seeing is the share of products that are coming in from a very low labor cost place like Mexico
00:14:01
Speaker
where you're looking at $6 to $8 a day for labor is just accelerating at a crazy rate. And it's a principle of economics of comparative advantage of
00:14:18
Speaker
resources tend to migrate toward places where they're going to be best used and the lowest cost production to produce products for a market that is willing to pay for those products. We used to look at places like Mexico as primarily a winter supply market, but they've
00:14:40
Speaker
massively expand. And we're going to maybe have a chance to get into talk around some of the controlled environment agriculture. But when we think about tomatoes, one of the really important partners that works with some of our controlled environment in Kentucky now, Master Nardi's, is the biggest importer of tomatoes from Mexico, period. Bar none, it's not even close.
00:15:08
Speaker
And as we've looked at the feasibility of controlled environment and opportunities here in
00:15:16
Speaker
in Kentucky, the reality is that places like Mexico, it's not just that they have a low labor cost, but they're able to build an industry and infrastructure there that allows them to produce a massive amount of production using controlled environment and shipping that product into the high value next door neighbor of the United States.
00:15:45
Speaker
Yeah, those imports are going to continue to grow and put pressure on our wholesale level of production. We've seen, frankly, the volume of production overall in the United States for fresh vegetables on a slow, steady decline over the past 15 years. Wow.
00:16:06
Speaker
Is that just on the wholesale level, Tim? For everything. For everything, gotcha. Of course, wholesale is the largest by volume. Yeah. And as we had sort of opened our discussion here, there are many different kinds of markets and many opportunities that are particularly well played in the local products to local markets.
00:16:33
Speaker
spaces like what we have with the agritourism, farm to school, Kentucky proud programs and restaurants.
Rising Input Costs and Labor Issues
00:16:42
Speaker
Yeah, those sorts of markets like that can tend to be a little bit more insulated from some of these larger economic forces like that, but it's not completely insulated. Yeah. Well, I think, you know, you opened the door by saying a four letter word at some point, cost.
00:17:03
Speaker
And this is maybe something we can open it up and I'd be curious to hear what Alexis as a grower and Alexis and Ray as agents have you, you yourself or others had your eyes bug out over the last few years over the input costs. Cause you know, we're talking about imports and these kind of macro level trends. One thing that I think everybody's been subjected to has been the increase in input costs because fertilizer is fertilizer no matter what ground it's going on.
00:17:35
Speaker
any, any initial thoughts from YouTube or, or, and then maybe some perspectives on whether people have been experienced in that, uh, out in the, in the world. Yeah. Well, we, we certainly track that and, and farmers of every type, uh, had been ringing their hands over higher input costs, pesticides, fungicides, fertilizers.
00:17:57
Speaker
We have an index that actually tracks prices paid by farmers in the U.S. vegetable sector. And we saw sort of through this COVID period, 21, 22, it took a massive hike in input costs and down a little bit in 23, but still at very high levels where
00:18:17
Speaker
Farmers are paying more for pesticides and fungicides, but it's also for farm equipment and other kinds of infrastructure and packaging, interest costs that translate over into operating expenses. Any farmer that you're going to talk to out there, produce or otherwise, they've been wringing their hands trying to navigate themselves. How do we think about
00:18:43
Speaker
our profits, our viability, managing these higher costs, and can we still raise the prices to cover our higher now breakeven costs? Will the market bear that? And to some extent, it will and it has, but how far can you go with that? And I think we're going to continue to see some markets bear those costs better than others.
00:19:10
Speaker
Yeah. It's interesting. Oh, go ahead, Alexis. I was just saying, I remember when, um, I don't know if it was 2020, the end of 2020 or the beginning of 2021, it might've been, I was talking to our fertilizer sales guy. We have a, an area that does, or a place that does like bulk, you know, you'll get a scoop full of urea or something along those lines in Boyle County. And I was talking to him and he said that.
00:19:38
Speaker
Urea is a predominantly nitrogen source of fertilizer that a lot of growers use. It was $300 a scoop and practically overnight it went to $900 a scoop. He was like, I'm not making more money off of it. That wasn't him making a huge profit. He's like, my profit margins are the same. It just increased in price that much. To see that and then to really put a number on it,
00:20:05
Speaker
And it wasn't just, you know, chemically synthesized fertilizers, right? It was everything. It doesn't matter if you're organic, if you're using compost, you know, gas went up, everything did. So to really put a number like $300 versus $900 to imagine that going, being every input that a grower uses and then not really being expected to raise prices was really hard. And you had to raise prices, but then you got pushback on it. And that's when you're doing direct to retail,
00:20:34
Speaker
and direct marketing, that can be hard to educate your consumer on that. You're not trying to overprice them. You've got to make a dollar, right? Just to be clear, Tim, you personally set those prices, is that correct?
00:20:53
Speaker
Do we have a cell phone number for Tim? No, no, no. Can you give us some insight, you know, whatever level I'm operating at, let's just be generous and say fifth grade.
00:21:08
Speaker
insight into what dynamics have kind of Caused or factored into those input cost prices increasing like what what's the you go to the the southern states or wherever and you get your bill and It's easy to say. Oh, yeah, everything's going up. Everything's everything's increasing But what are some of the things that have kind of led to that? Yeah Yeah, I think there I think there are a handful of forces that have all kind of come together all at the same time Brett, you know, it's a
00:21:37
Speaker
We're all probably tired of hearing it in conversations with places like car dealerships or computer equipment, but supply chain disruption was a real thing during COVID.
00:21:49
Speaker
And it impacted a lot of manufacturing. It made it very difficult for production of typical inventories. It made it very difficult to forecast. A lot of trucking and distribution infrastructure went through crazy disruption. And we certainly saw it in the produce industry where we saw trucking costs spike to the highest it had ever been by far.
00:22:14
Speaker
during 2022 and came back down. But we have this ripple effect that goes through the whole economy that impacts a lot of our different inputs. But I would say, and it plays into our more to our farm communities as well, one of the biggest disruptions has been labor and labor availability, labor costs, higher labor wages. But
00:22:45
Speaker
Finding people that are willing and able to work. We had COVID introduce its own sort of narrative of how labor disruption and who's going to work in a manufacturing plant and how do we find labor.
00:22:59
Speaker
As we look at the labor situation here in 23, 24, one of the measures that I like to track a lot here for Kentucky are just our H2A wage rates. And we're looking at, for 2024, an increase from the 1426 an hour in 23 up to 1515 an hour
00:23:25
Speaker
another pretty big spike and those labor wage rates for our migrant worker folks that are helping us in our production ag spaces have just become more and more challenging. Talking to a gal down at the fruit and vegetable growers meeting
00:23:44
Speaker
even a relatively small farm in Kentucky, but she's saying they have 15 H2A workers. And the impact that that has on farm level production is substantial. When you're talking about an industry on the produce side, you're looking at 30 to 40% of your total cost of production are labor related. And it's similar
00:24:11
Speaker
Alexis when you go over and look into the cut flower nursery greenhouse space there as well. It's a different kind of labor.
00:24:22
Speaker
finding good workers that can come in and do the job is increasingly a challenge for us, no matter what market channel. Well, and it's skilled labor, right? That's always something you have to remind when I've had people say, oh, I've got some high school workers that would love to come do stuff, but it's not that I can just take any high schooler and throw them in the field and they're just going to be able to work for me.
00:24:51
Speaker
not to say that they couldn't with some education, but I have to take time. And that's the same, whether it's flowers or veggies, you know, knowing when a melon is ripe, knowing to look for insects, whatever that is, it's skilled labor. And I think some of us forget that sometimes, like, why are we paying them $15 an hour? Well, because you have to educate, they learn, they know things are educated in this. And, and that's just, sorry, that's my soapbox. I get a little upset about like farming is skilled labor.
00:25:18
Speaker
It's interesting that we have some producers, Alexis, that they were more traditional row crop producers. They had a history in tobacco. But the reason that they got into vegetable production or any kind of hot tunnel greenhouse production originally was to manage their labor schedules so that they would have year-round work to keep labor. And I kind of knew that. I'd seen that on paper. But hearing this very good producer,
00:25:43
Speaker
Just spell it out and lay that out. It was kind of like a bell went off in my head. He said, it's about my labor. He said, I've trained these guys. They're dependable. I'm going to have year-round work for these guys. He was actually diversifying his production, not for the sake of diversification, but to manage his labor. Really interesting, really interesting discussion with this guy. It was several years ago.
00:26:06
Speaker
But yeah, kind of a little light went off in my head. I'm a little slower sometimes, but he kind of walked me through it and I was like, yeah, I kind of knew that, but he just really put the emphasis on the labor and keeping skilled labor. He said, I will not lose my labor. If I do, that's my operation. So he valued it that much, but it's exactly what you were saying, Alexis. Skilled labor that's trained and ready to go. Yeah. Big deal. As I think about some of these, you know, both the macroeconomic
00:26:34
Speaker
implications and also the ways that that's affecting folks here in Kentucky or here in the US. One of the decisions every producer has to make, I think, is about how extensive or intensive they want their operation to be.
Controlled Environment Agriculture in Kentucky
00:26:49
Speaker
And if it goes by the amount of sweat that I contributed to the soil at the UK South Farm back when I used to work in high tunnels, I would say that's a pretty intensive kind of system.
00:27:01
Speaker
And I'm still making a pitch to the natural resource conservation service to declare Kentucky the high tunnel capital of the US based on the number of NRCS high tunnels that went up. But this controlled environment agriculture, CEA, we sometimes call it, which it could, depending on who you talk to, it may be greenhouses, it may be high tunnels.
00:27:25
Speaker
That's just been a huge part of the conversation and obviously all those increasing costs and everything else affects that. I'm curious because, you know, we've been right on the forefront of a lot of that controlled environment stuff and the development of that. We have some really great people we're going to have on the podcast in the future who are working very specifically with controlled environment growers. What do you think, Tim, you know, you should think back over the last
00:27:51
Speaker
I would say five years or so, maybe a little more. And then now the present moment, what are some of the key stories, key considerations on that that controlled environment stuff? Yeah, so there's so much to say around that and it's changing fast.
00:28:10
Speaker
I guess I would want to even take a kind of a wider lens chronological view to see how even with things like high tunnels, it's a relatively recent phenomenon here in Kentucky.
00:28:24
Speaker
in terms of simple production enclosures that initially were put in place to a plasticulture type system to grow some transplants, maybe do a little bit of season extension. A few of only the very sophisticated leading commercial growers would be involved with those. But we saw that program just really expand over the course of the last
00:28:53
Speaker
seven to 10 years or so to now where Kentucky is by far the biggest player in the US South for NRCS funded high tunnels. We have over 1200 high tunnels that were funded between 2010 to 2020 and almost 3 million square feet of high tunnel acreage. But what's been driving that I think Brett has been
00:29:23
Speaker
more and more sophisticated producers that are looking at opportunities to take advantage of being into the markets earlier. That could be a farmer's market, it could be an on-farm retail market, it could be taking advantage of getting into the produce markets where prices tend to be a little bit stronger earlier, later season, season extension opportunities, and more and more producers, especially in the last few years, looking at how can this support something like CSA.
00:29:53
Speaker
or how can this support something like even year-round production in these kind of off, what we've considered off-season systems, producers getting more sophisticated where they'll have two or three of these high tunnel systems that are all integrated into their production system as a way of managing risk for weather, for markets,
00:30:21
Speaker
a little bit more intensive production system. And as I'm sort of watching it play out, it seems to me like it's almost this staging up of where are we going with even this next stage of thinking about controlled environment, controlled risk management,
00:30:38
Speaker
And as we've seen here in the last few years, it's almost been a one step, two step, three step, 20 step leap, then up to this big massive glass structure controlled environment kind of system.
00:30:56
Speaker
But there's a lot in between and actually we have a lot of producers that are using more and more sophisticated, not just high tunnels but glass and other kinds of production, soilless media, supplemental lighting, supplemental heat.
00:31:12
Speaker
looking for ways to manage risk, manage production, take advantage of what they see as emerging market opportunities and moving the kind of technology of how we do production at the farm toward the market opportunities that they see. The challenge is keeping in mind the costs and the risks and the risks that come with the infrastructure costs that are involved with this.
00:31:41
Speaker
There's still labor and there's still a lot of these other things that you have to be thinking about as you're thinking about the feasibility of one system versus another. So one thing I'm hearing is that it is more expensive to build a semi-permanent structure and cover it in plastic to grow vegetables than to just grow them in the ground and hope that mother nature plays along.
00:32:03
Speaker
Yes. I did a high tunnel talk at the fruit and vegetable conference and I told everybody, and I was like, who in here has a high tunnel? And you know, they raised their hand. I'm like, congratulations. You have a toddler that you now manage and it never grows up. You have a toddler 24 seven, 365 for as long as that baby is up. Right. I've heard of, I've heard one farmer talking about likening it to
00:32:28
Speaker
suddenly i feel like i'm in the dairy business i've got it all the time it's now your lifestyle do you guys find that and this more of a ccd question i guess but as uh producers get bigger they get more sophisticated at what point because and i'll ask this um
00:32:49
Speaker
Producers have to start thinking about managing risk and prices and marketing for it and having the crop marketed before. Do you guys find that with the increase in sophistication of production that producers larger scale and you guys that work on a state scale, this is more for you guys a question for you all. Do you find that producers just naturally start to ask those things? In fact, I guess what I'm asking is once they get too big to fail, they have too much invested to just fail easily.
00:33:16
Speaker
Do produce our producers kind of making that progression as well on the managing risk side I certainly hope they are because I know greenhouses these structures aren't cheap and there's lots of money tied up in labor and Materials and getting a crop, you know often going and to market our producers kind of asking the right questions there as they progress up the production chain and
00:33:40
Speaker
I think so. I mean, I feel like that's where we've got a full-time employment with our CCD group. You know, it's trying to provide good resource information on cost technology options, even with high tunnels. And you know, there's many different kinds of high tunnels. Do you have a sliding high tunnel that can actually move back and forth? Do you have different kinds of structures?
00:34:08
Speaker
I mean, there's so many different options that are out there. And especially when you move into starting to add glass or supplemental heat or supplemental light, you have all these marginal improvements that can be made. And I feel like that's really the frontier of where we're at right now in terms of extension, trying to catch up with the best options and come alongside producers as they're asking questions. And there are a lot of variables and it's not an easy
00:34:38
Speaker
kind of an easy formula to just plug in and do this, don't do that. That's a lot of resources that producers have too. I have a couple of thoughts about this. I thought a lot about high tunnels from different angles. So one of them is, I think when high tunnels came onto the scene and still now there's this focus on season extension as one of the key components of that.
00:35:02
Speaker
And don't get me wrong, that is a major reason to have a high tunnel because surprise, now you can grow stuff outside the traditional window of markets that you have had access to before. Now, Brett, you're messing up our rest period that we've talked so much about in the winter. We're like trees. We're going to drop our leaves and hibernate. We're going to go dormant, aren't we?
00:35:20
Speaker
Or is that not the case now? The people who go pedal to the metal, that's more of a question to talk through with your therapist than it is with your ag economist. All the time. Don't tell me what to do. But the other component of when you extend that season is if you were relying on a traditionally seasonal market, something like a farmer's market, something like a traditional window CSA, now you have to think about selling that product to people who are not used to buying local produce in
00:35:49
Speaker
November, December, or February, March. That's one key thing. And I think that one of the solutions or one of the proposed things was that maybe farm to school would be an angle that people could pursue with that. And I think there have been people who've had mixed success with that. One of the challenges is that you're growing a premium local product and you're going to have to sell it to a school that's trying to figure out how it can afford a balanced plate menu.
00:36:15
Speaker
The other two things, though, that I heard you kind of mentioned that we've mentioned a couple of times is that viewing the tunnel not only as a season extension tool, but also as a risk management tool in several different ways. And I'll just give a couple of examples of that. So one is that the that we had a I used to work in the high tunnels at the UK Research Farm and we had
00:36:42
Speaker
Replicate plots. So we had a high tunnel and then a plot that was outdoors and they were planted exactly the same. And one year we grew some of these beautiful, tasty, red Italian sweet peppers. Now, if you know anything about peppers, you know that they usually go a green pepper. Well, if you leave it on, we'll turn into a red or yellow pepper eventually, i.e. the longer you, the more sweet and delicious and marketable you want that pepper to be, a being a specialty color, the longer it's going to be in the field.
00:37:12
Speaker
If you know about Kentucky, you know that we have these lovely summers that are extremely wet and there'll be cool nights sometimes and then warm nights so that the bacteria and the fungi are both happy on the plants. So we had a, we had a plot, same length of row of these peppers. And one day we harvested 30 pounds of marketable peppers out of one row of these peppers.
00:37:38
Speaker
In the high tunnel that same day, we harvested 160 pounds of market peppers out of that because you literally have an umbrella up over the peppers. And so all the water they get, you're giving to them right at their roots where they want it and the peppers don't rot. And then the other thing, the other component of the management is the climate resilience component.
00:38:04
Speaker
barring the crazy high winds that the tunnels like to take a ride on sometimes. Other major climactic events that could really decimate an outdoor crop, you have some degree of ability to manage that so that the plants themselves aren't damaged or don't have a problem. And so I think that's been one of the main pieces of evolution that I've seen in high tunnel growers is understanding, yes, it will give you windows to market products out of
00:38:32
Speaker
outside the traditional window of the market. And there's challenges with that, but also that this provides you a little bit of a buffer against some of the crazy and unprecedented weather events that we're seeing in the state. And that's something that you mentioned earlier. So I think as far as the risk management, just from a production side, it has some real key benefits.
High Tunnels and Produce Quality
00:38:53
Speaker
But again, you have to manage it really intensively because it can also cause major problems when it's really, really hot as anybody who has one. Did you, did you see, have you seen a bunch of tunnels go up in your county, right? Yeah, we, we've had several, even since I've been there in, uh, Bourbon County 13, 14 years. There's lots and I'll just be driving along the road and I'm like, have I just missed that or am I just now noticing that? And it's interesting. And those producers.
00:39:21
Speaker
Tim, you mentioned earlier that they've kind of gotten sophisticated. They started out growing in ground and now several of them have went on to just various type of substrates that they're growing in, bag mixes and pot mixes and core and bark mixes. It is incredibly difficult to try to keep up with these producers because they're savvy and they're trying things and they're pushing the envelope of production.
00:39:44
Speaker
But yeah, yeah, to answer your question shortbread, sure, I've seen a big increase in that. And, and I'm very careful now about making an assumption like a hot tunnel is a hot tunnel. Boy, once they open those up out of Lexus, I don't know if you see this, but I never know quite what I'm going to see. I've seen some very interesting production systems in those.
00:40:06
Speaker
And I just wonder, is that kind of what's driving? Tim, did you say that there was an increase in receipts overall in Kentucky, kind of a trend? You and Brett and those of you that look at numbers a lot. Is this what's driving that? Yeah. I think that's a part of it. The thing about the high tunnel is that it plays so well to our small scale producers.
00:40:28
Speaker
Oh yeah, absolutely. You've got limited ground, perhaps. You're producing primarily for a local market. You're trying to produce really high quality products for a farm stand or an on-farm retail market. And even moving into organic production, it lends itself really well in those production systems.
00:40:52
Speaker
And so the more that you can control the quality and through an intensive production system, bring a higher quality product to market. Even in our produce auctions, we see wide ranges of low price to high price and talk about a marketplace that will immediately reward people who have a higher quality product.
00:41:15
Speaker
If I bring my peppers in there and they're all nicely sized, beautiful, and put that next to another box of pepper that has sunspots, dirt, just dragged in from the field, misshapen, you immediately see, how come that guy gets $12 for a box and I get $3 for a box? And the market disciplines that. And those market prices are
00:41:42
Speaker
always there sort of promoting these marginal movements toward being able to produce better quality products. And I think in our direct to consumer market spaces that dominate Kentucky, those tend to get especially rewarded. Yeah, absolutely. We see that at the farmer's market in the price. I mean, different markets set their prices different ways. I've worked with markets that set like a
00:42:07
Speaker
a base price that you can't go under. And I've worked with markets that don't set any kind of pricing. But the pricing has always been interesting at markets, to say the least. But I feel like the quality being driven up is is, yeah, I've seen that over the years that you get this beautiful stuff. And Alexis alluded to it at a time when normally you would not see beautiful things or Brett mentioned it with the peppers, you're seeing these beautiful, colorful peppers that I wouldn't that you wouldn't just never see.
00:42:33
Speaker
grown locally fresh for a local fresh market because the risk involved in growing those peppers that long in the season. But we're starting to see that. It's fetching higher prices and it's almost like a standoff. When farmer A looks at farmer B and they're like, he raised just 30 cents and that's the the pricing strategies there sometimes really interesting to watch play out at markets. But yeah the quality is definitely from my experience of just looking around different markets working with my own local market. It's increased and a lot of it
00:43:00
Speaker
is due to the fact of this protected agriculture aspect of hot tunnels, greenhouses, things like that.
00:43:07
Speaker
It makes me wonder, talking about the idea of risk management and infrastructure improvement, I'm curious, and maybe it's too recent for there to been studies, but have there been or have you noticed any slowdown in the adoption of technologies?
Economic Factors Influencing Agriculture
00:43:25
Speaker
Not necessarily high tunnels because they're cost-shared through the USDA, but in adopting some new technologies due to the increase in interest rates.
00:43:35
Speaker
popped up in the last handful of years and gone up pretty steeply. Yeah, that's a great observation, Josh. And that certainly has been a big driver to see higher, we see higher glass costs, higher building costs, higher construction, waiting time periods for people to come in and do construction if you're putting up a glass house or even a barn or packing shed or something like this. And so those costs are definitely higher. And I think that
00:44:06
Speaker
that hopefully is getting more of our producers to at least put a little bit of a slowdown on how quickly they're moving into some of the new technology, capital intensive like that, to think about how am I funding this and what's going to be realistically the cost and timing of being able to put this new system together.
00:44:32
Speaker
Uh, you know, you always have the learning costs too, of once you get a system in place, how do I learn to best take advantage of it? And we've had some, as you guys all know, some, uh, kind of pretty high profile infrastructure, go on, go down, uh, challenges in Kentucky. Yeah. Well, and so that talking about the,
00:44:58
Speaker
I just want to, we have so many things we could talk, I think already feeling like we could talk to you about three hours and not even at the surface, but interrogate you for three hours. You mentioned some of those, some of those macro scale things about just the overall construction costs, overall, you know, building considerations, et cetera. And it makes me think of one of the, the biggest, yet sometimes we, we don't talk about it as much in, uh, on the podcast and elsewhere.
00:45:24
Speaker
parts of the, of the industry, which is the nursery side of things that the fact that surprise, surprise people like to have plants at their houses and their landscaping. And so as with housing and with other, other macroeconomic trends, so go things like the nursery and greenhouse industry. So any, any major insights as far as recent, recent trends there or thoughts about that and the way that that just generally intersects and interacts with other parts of our, of our culture.
00:45:54
Speaker
Yeah, you know, that industry in Kentucky is really an important specialty crop player. More than double the value of the cash receipts that are generated through our greenhouse garden center spaces. A lot of times what I tend to watch for in the nursery greenhouse sector in terms of big drivers are things like housing starts and
00:46:24
Speaker
construction and those things that lead to people buying more plant material, more sod, all that sort of thing. And largely, as you guys very well know, higher interest rates has put a big pause on a lot of new housing starts. But quite interestingly, even through this past year with higher inflation and higher product costs,
00:46:52
Speaker
I don't know if part of it was maybe a post COVID response by consumers, again, looking for some sort of experiential way to engage flowers and plant material and things like this. Our garden centers saw one of the most profitable years that they've ever seen, not just in Kentucky, but nationally.
00:47:18
Speaker
It could be, you know, coming out of COVID, people are looking for ways to plant some flowers or plant some plant material or shrubs and things around their, uh, around their house. And, uh, even with the high, some of the higher costs that are involved, willing to pay those higher prices. And just the one other thing I'd maybe mentioned, Brett, in terms of just some of the economics, they're just like we see in our produce spaces.
00:47:48
Speaker
labor is a critical input there. And a lot of our garden centers and nursery folks pointing to laborers, one of the biggest barriers that they've seen, to be able to get to the to the margins that they would like to be able to grow, like they would like access to labor. And Alexis, like you're talking about skilled labor, people that know what they're doing in the production spaces there can be really hard to find. And
00:48:17
Speaker
I think that's going to continue to be a challenge for us as we're moving here into the next several years. I know our local operation, Tim, and you've probably worked with them some. Bell Greenhouses, when they reestablished themselves here in Birmingham, the head grower was so excited that he said they were able to get back, I think, I don't want to misquote, but almost every single one of the growers that had disbanded with an earlier operation,
00:48:44
Speaker
were able to bring a lot of those back and it goes back to skilled labor and you talk about an excited person when they were able to bring the old crew back that knew the facilities of course they made a lot of upgrades to that facility already but he was so excited not to have to go through at least the training for that level of workers and the workers have workers under them.
00:49:06
Speaker
That was pure excitement and it all went back to what Alexa said, the skilled labor. They were able to recapture that and I thought that was just a rare situation from an earlier operation that had changed up and changed ownership and a period of time had passed and they were able to bring them back and I thought it was incredible. I thought it was incredible, but it all goes back to not having to do so much training for that labor. It's pretty great.
00:49:32
Speaker
Well, I think I can say from experience the post COVID reconnecting with plants, I think me and my wife might be responsible for like 0.01% of that boost to the nursery greenhouse. You're doing your part. Feels like it. And I'm already looking ahead and I think next week or in the upcoming episode, we're going to be talking about our plans for our gardens and stuff for 2024. As you as an ag economist look ahead to 2024,
00:50:02
Speaker
What are some of the things, you know, in Kentucky, nationally, whatever you want to, however you want to riff on it that you're, you're looking ahead to?
Future Projections for the Agriculture Industry
00:50:09
Speaker
Yeah. Well, you know, I think the, the slow steady gradual change sort of things to watch are the continued changes in imports and the wholesale market impacts and how many of our larger volume wholesale market channels are adjusting to things like this.
00:50:31
Speaker
I try to watch really closely how might those be impacting even things like our produce auction markets. And surprisingly to date, they've been relatively insulated, even though they've grown and we have order buyers and larger volume folks that are buying regionally out of those auctions now.
00:50:55
Speaker
We still tend to be in this market bubble, I think, here in Kentucky. And so I think, again, inflation and higher prices are going to
00:51:07
Speaker
hopefully slow down here and I think gives some better opportunity for a lot of our direct-to-consumer market opportunities. We've seen a lot of those input costs start to come back a little bit, especially things like fossil-based fertilizers and fuel and interest rates a little bit.
00:51:36
Speaker
hopefully we'll see some of the production costs not go higher, but stay the same or come down a little bit, many of our producers here coming up. But I think the thing that I am watching probably the most is where on earth are we going with this controlled environment space? You know, the vertical farming system kinds of things where you're basically 100% artificial light enclosed.
00:52:03
Speaker
system, primarily leafy greens, but other kinds of products there as well. We've got several really, really big systems that have started production in Kentucky, some that have started and stopped already, but a lot of investment that's going on there. How might that be impacting our local markets? I know some of these folks are pursuing partnerships with some of our big well-known regional retail brochures.
00:52:35
Speaker
But also in the just the control of environment greenhouse spaces, we've seen some turnover and some changes.
00:52:43
Speaker
some new management, some new kinds of production focus that's going on there. That story is not done by any means. And I think like any kind of a new technology and a new industry that goes through a lot of growing pains, there are going to be some high profile failures, but there are going to be some learning, some circling back around. And
00:53:10
Speaker
Yeah, how that's going to impact our local markets. I think all that stuff is still to be determined. I think in the short term, I think our folks are looking at a really positive 2024 in terms of market prospects, a lot of interest in local products. Good.
00:53:34
Speaker
But this industry has seen a long steady 20 to 30 year growth. What are we looking at for the next five years? It's going to be really interesting to watch. Something that stood out to me in the graphs you sent out that I was surprised by, although I guess I shouldn't be, is that we are consuming, like in the US, more vegetables per capita.
Market Demand and Support Programs
00:54:00
Speaker
Like the first one that stood out to me was like the millions of pounds imported in production growing much faster than the rate of our population. Like I think the population's only increased like 60% in that time, but the production volume has increased like 250% in that time.
00:54:18
Speaker
you know, from that perspective, in the big picture, there's just a lot more demand for horticultural products, at least in terms of vegetables. Are people just eating their vegetables now? Is that what's happening? Well, you raise a whole nother topic. You know, what does the tragic news in Kentucky, you guys may may have heard this statistic before is only 6% of Kentuckians eat their recommended daily fruit and vegetable intake.
00:54:45
Speaker
So we have a long way to go to increase our current consumption. A lot of potential. A lot of opportunity for growth. Exactly. So the shoe salesman, it sees lots of bare feet out there.
00:54:59
Speaker
But how do we move the needle on that? And what role is there in our local production to help our folks move toward better diets? And thinking about food access, I think is another really interesting challenge and opportunity, I think, for our local horticulture communities, roles for our food banks.
00:55:20
Speaker
farm to school program and SNAP and other kinds of food access programs where our local production can play a really important role, I think.
00:55:31
Speaker
We just need to find who decided cauliflower could be everything. And they marketed cauliflower as like the new wave and this have them do it for all of the vegetables or like kale was, you know, kale chips were huge there for a while. So we need like limited edition drops of vegetables and just a lot of hype.
00:55:54
Speaker
For a limited time only. Exactly. Marketing. Cool Robbie Pizza Crusts by Dre. Beats by Dre. I don't know. Yeah. Shout out. Put a label on it. Put a label on it. Only made 200 of them and then that's it. Just cut the, you know, carrots and the shapes of dinosaurs and everyone will eat them. Like this is the answer. Shave them down into baby carrots, Alexis. Take them baby carrots. And somehow they're always soaking wet. Yeah. The ones that are wet. Yeah.
00:56:23
Speaker
Well, before we, uh, before we started, I frantically was Googling how, how to podcast like Travis and Jason Kelsey. And, uh, one of the things that they said was to, when you have a big shot guest like Tim woods, you got to give them a chance to plug stuff. Current projects, ongoing projects, et cetera. And so a couple of things I'd love to love to just hear a touch more about, you know, plug where they can get more people can get more information. Two of them.
00:56:50
Speaker
So one of them is the market ready program. But the other one, you know, you kind of, I think we're tiptoeing around the edge of with the local food demand is the local food vitality index work that you and Jaris Rossi have been working on over the last several years.
00:57:05
Speaker
So yeah, please, that and anything else you want to plug and we can make sure we have links in the show notes. That was another thing that I read on that blog that I was looking at earlier. Links in the show notes, any other social media for the CCD or any of that kind of stuff, whatever you, the floor is yours. Yeah, thanks Brett. It's very generous.
00:57:28
Speaker
You've been around me long enough to know where I feel like so much of the opportunity that's going to be in front of local growers is going to hinge. Certainly you want to be mindful of your costs and understand what is breakeven for me, what are the different market opportunities. But for a lot of our folks, understanding marketing is really, really important. And we've had this
00:57:54
Speaker
market ready training program that we've offered through our UK extension for a number of years. That program has been branched out and offered now in 17 different states.
00:58:08
Speaker
a lot of our producers have gone through that. And it's a training program on helping producers that are interested in exploring commercial markets. And that means how do I sell to a restaurant? How do I sell to a grocery store? How do I work with a wholesaler? And there's a different language, there are different expectations, but also tons and tons of great resources and agency partners and
00:58:35
Speaker
Good folks that are willing to come alongside our producers that are looking at those opportunities. So that's one one program. A cousin to that you had mentioned Brett. A lot of the web based materials are kind of co-linked together in many places is just the center for crop diversification.
00:58:53
Speaker
and the marketing resources, the price information that's available for price reports, and how do I sell in some of these different markets. Great fact sheets and resources like that.
00:59:09
Speaker
I might just mention this. You mentioned the local food vitality survey is a consumer Kentucky food consumer survey that we've just completed here in Kentucky and we're pulling out just some preliminary information. We've shared a little bit of that out already. We're trying to develop a series of fact sheets we'll have on the CCD site.
00:59:32
Speaker
But it's helping our producers better understand some of the differences that we see in urban versus rural consumers. Older versus younger consumers. Quite encouraging to me and thinking about the interest in local food. We see our younger consumers being purchasing more local food products
00:59:56
Speaker
than we have seen for a long time and more than some of our more senior consumers even. So there's a lot of interest in this younger generation, but they've got other kinds of values that are connected in with food as well. And I think to understand
01:00:13
Speaker
how younger consumers think about their food and how does it impact things like climate or food safety or my community and things like this are all things that we're pulling out of this local food vitality. Ray, we talked about all the different market channels that folks are able to sell through. We try to look at people's perceptions about many of these different market channels and their perceptions of how they're performing in different places around Kentucky.
01:00:43
Speaker
And I feel like we have a really good insight now into how some of these different markets are playing in different communities, urban, rural, east, west, south. And so lots and lots and lots of data to pull together there, but we'll be pulling these market reports, Brett, for our CCD site and to encourage folks to have a look there.
01:01:08
Speaker
Yeah, and one thing we've spent a lot of the time talking today about some of the bigger trends and technologies and other stuff like that. And I just want to emphasize, Tim and I both spend a lot of our time working to support very small, very direct to consumer type markets, farmers markets, community supported agriculture.
01:01:27
Speaker
on farm stands, all that kind of stuff too. So if you're interested in selling or you're not having gotten started yet, maybe check out our episode on the Hort Biz Quiz. It can kind of orient you to some of the stuff that we have. But I just think over the last, as you said, 27 years in Kentucky.
01:01:43
Speaker
You've just done a lot to support people at whatever scale that they're at and whatever their goals are and what they want to do. And so if that's something that you're interested in getting and just checking out some of the stuff we have available across those things that Tim just mentioned would be a good first step and you can reach out to any of us and get in contact with your local agent.
01:02:03
Speaker
But yeah, uh, thank you so much, Tim, for, for spending some time talking through this stuff with us. I think we all learned quite a bit and are looking forward to some of that stuff you have, we have in the works coming out over the next year. You can, you can connect with the, the CCD it's on Facebook and on Instagram and on YouTube. Our handles there are at CCD UKY. So anybody else have anything else good for the good of the order?
01:02:32
Speaker
for the good of the order. I like that. Brett's rules of order. Motion passes. We are the fellowship. It was nice to have you today. You can follow along with us on Instagram at Hort Culture Podcast. You can shoot us an email. We'll have that email in the show notes or a message if you've got any ideas for upcoming episodes, if you've got any questions, if you're like,
01:02:57
Speaker
This Tim Woods character sounds like a genius. How do I get in contact with him? We will send you his email. We really appreciate you being on Dr. Woods and I really look forward to and use a lot of that information with a lot of growers out there. We're grateful that you do all that good work.
01:03:16
Speaker
But yeah, thank you guys for being with us today. I like to call us the fellowship. I think we should start doing that. But anyways, thank you for being with us today. We're happy to have you. Motion defeated, motion defeated. Why? They ruin everything I love. We're the true leaves, remember? True leaves. Get to our followers. Our followers are true leaves. Josh, get it together. Where have you been? Anyways. Leaders, followers, it's all the same. We love you all. Thank you for being here, and we'll chat with you next time.