How to industry sign banking kentucky pdf later
I'm going to talk a little bit this morning about three different projects that I have going on within the AG econ Department on him specifically related to him and him project so not all of it is exactly farm at the farm level so we're going to talk about exactly what tom was talking about how does him compared to some of the other crops I hear a lot about what's going to replace tobacco the crops I think it's really going to compete with I think it's going to be corn beans specifically on the fiber and on the grain size and I'll talk a little bit about the CPD side of things and know that's the majority of the production is in the state and we're still working on several things to go with that and so how does how does return to favor so kind of get at this we we've set up a model to simulate what might happen and to kind of give you a little bit of background on this as far as grain prices we're looking at great prices somewhere between 65 cents and 75 cents and there's an escalator in there for over a certain yield price goes up okay five or seven we look at some over 25 cents of 10 cents grain yields we're looking at six one hundred pounds maker up to 1,500 pounds maker you can argue with me on whether or not on higher low on the fiber side we're looking at somewhere twenty four thousand pounds of twelve thousand pounds over between basically two ton in six time granted there's going to be a little high but I think we're getting there now hopefully dr. Williams and a few others their research is showing that we're getting closer to that input cost will run those off the UK budgets the poly cost I'm pulling those in as well now one thing I do have in here that some others may not think about when I go through and I look at all these reports and I will say doors reports and stuff up and there's something important to talks about what does it mean some of the main issues we're having with this problem one of them is crop failure so I've got it set up in here that there's a 20% chance across failure probably made me closer to 35 40 50 percent in terms of crop failure so that's just dude weed pressure and so on and so forth within the bog work and seen varieties haven't so keep that in mind and then I'm really looking at comparing those to corn and soybeans and return above beer will cost for these for these crops so when I look at this this is basically a budget for grain and fiber so and this is what my expected values are what the average would be so that's 70 cents there's my 8 cents about 6,400 pounds about 786 pounds on the grain side of things a couple things to take note of is there's quite a bit of difference in the number of pounds per seat for the fiber side versus the grain side and in some cases you're going to see the price for the fiber side to be a little higher for some of the seniors a couple of other things you're going to look at the copper side I'm estimating somewhere around $41 loss per acre okay that's kind of what I would expect and I think as we get better breeding programs and domestic seed comes into production a better understanding of how many pounds per acre or seed we need some of this it's going to correct itself and we're going to get back to a better number here on the great side of things I'm looking at about 6 $6 per acre return above variable costs of fairly above great email okay and then I tried to put this in a graph so it makes it look easier to understand the main point I want to make of this red line expiry the black line is green there's tremendous variability so I look at it potentially a $600 a your loss all the way to the $600 per game okay that is tremendous variability in this market a lot of this is result of there's no crop insurance and it also shows up in here that 20% loss or 20% chance of failure so one thing that I get producers that call and ask me oh I want to get in this are you willing to lose and can you lose it's just the point-blank honest but according my motto I'm looking at about a 50% chance have been positive return over barrel costs for fiber and about almost 65% chance opposed to return on the green side of things now I know that these are not the two main crops so we're looking at CPD is the majority of the crop in the state but these are the easier ones to get to get my hands wrapped around and to get a better understanding of what's going on within these markets you compare those to corn and beans these are 2018 numbers these are kind of what I'm expecting in terms of return for those and you can see the returns for those are pretty not near as much variability in those markets okay cause the CBD productive this one we have the the types of contracts that are out there are not converging to any sort of production we're trying to get a better understanding of that but before I put one up here I want to have that bedded and a few other things too at least in the right direction right now okay so some final thoughts on that tremendous variability as you can see in the graph commodity markets I expect these to turn it into commodity markets the financial market is I think a real problem my wife works in the banking sector and you were to go and ask her for a loan she's basically gonna tell you well what other collateral and what other crops are growing and are you profitable in those if you're profitable no zone I'll give you some money for those but I don't know that we're going to touch him right so domestic seed productions that comes along I think will help on the cost of production side and on the fixed cost side I haven't included any fixed costs in this model yet so that machinery costs and some of those other things didn't need to go in there so it's six bucks they're probably gonna be less than zero a second project where might this actually be grown in kind of this is a really exciting project that one of my grad students has taken on it's under an NSF project so and we're gathering a lot of data from across the state it'll make a little more sense and a few minutes when I get to some of the graphics but using the cropland a layer alone with a lot of NASA data and common data and the common data layer and graphic this and we're actually able to do is we're actually able to get down to the field scale so at the field level I can tell what frock was being produced in that field we're using satellite imagery to get what crop was being produced in that so I've got the main crops we have in the state so winter wheats back of corn soybeans and alfalfa just pulled out an example of Simpson County here and you can kind of see the variation a lot of its beads as I would expect but one thing that I'm hoping some of the research in this room doesn't lead to is where does they have a fit at in the rotation right and the reason I say that and I think it may become even more evident or meaning in the future is that as we continue to have budgetary issues at the federal level potentially our safety nets continue to come down here some continue to look for other crops to fit into that rotation could be one of them so how is it going to play into that corn soybean rotation where's it going to fit in in that cycle and what what happens with yields so basically what we've done is we've measured this data so the crop production data with lots of data on slow soil types elevation is trying to get it production and precipitation but what we're expecting in terms of how we predict what profits coming next and because I'm an economist I have to have sort of equation in here just justifies my existence something so we put an equation here basically what we're doing is looking at probability okay so what's the probability that one crops after another well a couple of interesting things this is exactly what we would expect to see right in corn soybean rotations if you had corn one year the next year we would expect you to go to soybeans if you had soybeans you would expect it's going right so we're getting the rotations to start to show up in there now we're trying to slide in him into this and so how does that play in there and this is one piece that we don't have totally totally all pulled together yet but once someday abroad most and and crop some people's can tell us how this fit in there we can modify this matrix to get better representation than that in this graphic okay we expect the same thing I don't know that I expect much acres to come out of alpha but might be a possibility tobacco we would expect the same tobacco after it's back up so the rotations there it's what we expect we just got to be able to get pulled into this and I'm sure all of you love USDA surveys right so we get on a USDA survey we get asked about what our crop production is going to be for the year and then the market moves tremendously when they come out with those reports right this is going to be hopefully one way the weekend subsidize or because we can actually put a distribution in this so this is for corn from the state of Kentucky we have something a little over 1 million acres of corn two million acres of corn and the state on average and we're looking at our distribution and it's on average we're estimating that distribution back so tells me our model is is operating pretty well that we're able to get back what we expect I know we're a little short on the back acreage but that's a function a few counties that are missing a few majors back in producing counties that are missing trying to get data on as well so but we're getting there pretty happy with this kind of curious to see what the distribution looks like perhaps once we actually get it put in there okay and then we also have this very large other so this is all the other crops produced in the state that we have information on as well which may be another place where M comes into play I'm always asked well where where do I think M production is going to be but if I would I states open up heavy production and let it go let it really go they're gonna be the green producers in my opinion they're gonna be the producers of green okay and that's purely because they had the soil types they're gonna have the yields and a few other things where do i think kentucky fits in production i think is really an area where Kentucky could could be a player we've always been a forage producing state so I think power will be produced in Kentucky and Tennessee so the last project that we're working on is moving completely away from the farm we're moving more towards alert consumers so we all talk about what we can produce it who's gonna consume all this stuff you know where's where's it going to go so we've been trying to to pull a data set together and we're using this Nielsen data set it's a large national data sets that you can see in this or reflecting national levels and we've got it from 2008 to 2015 so we've got a lot of data pre 14 fire bill and one year afterwards the downside of this is this data sets operates on a two-year lag so 16 members will be coming in at some point time later this year so we'll be able to add those to it so will at least have two years where the data after fourteen partment but a couple of things to notice so the quantity of hemp products sold our region so we've got this the country break it down into the Northeast Midwest the south and the West interestingly enough we're starting to see tremendous growth and especially right here 13 14 15 and the amount of nuts or grain that's entering the market we've got some information on nutrition we've got some information on printing the curious thing to look at this about is where are regions in the country that do or don't have certain products right and that's what we're trying to get at is in certain areas of the country that have access to certain products and some that don't you're no look is by far the largest has the largest amount of data within our dataset one other thing actually better note about this is within this data said products that have hemp venom may have one percent or they may have a hundred percent so I don't have any designation as to the percentage of anthem I would love to know that number right because they're not going back into what the and at the farm level would be but we're not there yet and I know I know the statement said is missing quite a few things especially on the CPU all side of things if anybody knows of the day you said that I can get out where I find that type of information I would love to talk with you and figure out how we can we can work together on that project then I can break it down I'm going to guess soft drinks or soft drinks at containing Tim there was a few of them that lasted for a few years and nobody liked it anymore okay but we're starting to see some some trends cereals has had a peak and now it's come back down these are just a number of products that have it you know have him in them when you get down here into we are able to capture some of those farmer health abudiate products that are in this so that's kind of one of the interesting things and I guess if you want to know a little bit more about where this data comes around if you think about how many of you have a Kroger card that's where this comes from right this is data that's been collected on Kroger guards old fingers you know it's so what's actually being purchased so so we do know so getting you more into the results and I'm presently only trying to break this down into a couple of key things so as I would have expected for the cereal and nut side of things and I would have really expected this from the nutrition and protein side of things but I think nutrition and protein side of things aren't showing significant because there's not as many observations in the dataset as there are for the for the cereal and the nuts but as I would have expected medium incomes so 30,000 plus and income are the main consumers products that contain memory right so the thirty thousand to seventy thousand and nine couple would be seventeen thousand above okay so interestingly enough though the median income producers have a higher number in terms of consumption of cereal and it's vice versa in terms of that so it's kind of an interesting finding okay one another thing from a marketing standpoint that we're thinking about is aid so and these are relative to the younger groups of less than thirty I believe so if you're over thirty you're less likely to purchase these products which I found kind of interesting okay because folks are less than thirty may not always be those higher income individuals okay so we're starting to think about and look at some of that married status played a little bit of a role a negative for the nuts but a positive for their nutrition we're still trying to parse out what what's playing some of these education is another big one that we thought about and I think this is really where the younger generation comes in as you get more and more educated you seem to have a stronger propensity to purchase products with him and especially moving into this protein and interest side of things so maybe this could be some sort of movement like we saw with Gianna and a few other products as well so that's one possibility one really interesting finding is that the Asian side or the Asian variable is actually negative that's not what I would have expected giving that Southeast Asia especially Korea a few others are some of the biggest consumers in the world of these products okay so they expected them to consume those products here too just as they do it all so that's what leads us back to this idea this isn't access to these types of products that they want so that's why we're breaking it down they're trying to look at it by region and Trump very often what they're at what they actually do even don't have access to the last one is the location fear rules or the regional variables so all this could be interpreted as relative to the Northeast so I would assume that the Northeast and the less would probably be the two bigger consumers and as you would expect the West is a bigger consumer more likely to consume than the Northeast except for nutrition and protein which I don't totally understand other than I think that again where they don't have as as much access to products out there as they do
n the Northeast but it's positive for the South for nuts but we don't like a lot of nutrition and cereal side of things maybe this is a function of we some of they have some of the highest obesity rates in the country I don't know we're just we're thinking about what I was going down there a body certain things are playing out when they are the last memorable that we kind of put in here there was some kind of interest is is there HIPAA legislation in your state your time okay we see it has a positive impact on Cyril but not on on the nuts off things which I which we can't really explain that other than most maybe most of its still coming out of Canada so they're not worried about where that's coming from so we're still trying to understand some of these variables so kind of in summary for that we're still seeing still expect some sales to increase income age race religion role playing key determinant and we could we could dig down a little deeper in terms of some of the marketing potential for some of these products changing mix of what consumers are purchasing we're seeing that take place and this is only another picture of the whole market as I mentioned we don't have anything on the CPD side the whole side I think there is one dataset out there that might have some leads and if anybody works with the spins dataset and has contacts there I would love to talk with you about that maybe how we get access to that degree the end of Business Journal cited in there all the time so we're trying to get trying to get a kind of work with them to use that and then we still need to understand this is all about quantities and how much is being purchased we haven't gotten to the side yet that really matters that's how much of their spending okay so we haven't gotten into the expenditures that people are out laying on that because then that translates back to profitability so some final thoughts we're still working on several different research areas more detailed cost of production hopefully going to continue to do that how it fits into the rotation I think one thing that we're missing out on and don't have a really understanding is the storage costs of him so I mean what's bigger nation do we have with these products once they get storage and how does that value change how quickly do we have to move them in and out of storage because storage of these crops especially on the green side and probably even on the floral side are significantly different than what a lot of our producers are used to using risk management we've got zero risk management tools I'm kind of curious to see we had the big announcement about they're putting forward legislation if that goes through does that open up some risk management opportunities so things like nap or the non non commodity crops does that open up that type of insurance for these conditions to get their hands on it it's not gonna happen overnight it's gonna take some time what our consumer expenditures transport cleaning costs these products comedy's have scaled so how big do we actually have to be data domestic seed production and then you can throw in access to chemicals insecticides and if one curious question I have is how many acres of hemp production have to be actually produced for a chemical company to actually entertain the idea of thinking about labeling this yeah what what makes happy acres you have to have make the Rd worth it so that's a good question maybe some bands that answer try to do a little bit of legwork on that to see if I can find any literature on I haven't yet all right it's kind of where we're at on the econ side of things we have a lot of different projects going more to come [Applause]