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The Importance of Agriculture to Fayette County

The Importance of Agriculture to Fayette County. Alison Davis Reum Department of Agriculture Economics University of Kentucky. Agriculture in Fayette County . 738 farms, down 11% from 1997 119,098 acres of farmland, down 14% 161 average acres per farm, down 4%

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The Importance of Agriculture to Fayette County

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  1. The Importance of Agriculture to Fayette County Alison Davis Reum Department of Agriculture Economics University of Kentucky

  2. Agriculture in Fayette County • 738 farms, down 11% from 1997 • 119,098 acres of farmland, down 14% • 161 average acres per farm, down 4% • Market value per farm: $242,401, up 42% • $3,492 average government payments, up 89%

  3. Fayette County Agriculture

  4. Equine Industry • The equine industry itself represents a significant part of the regional economy • 53.4% of total agricultural production in Fayette County is related to the horse industry • In Fayette County, the production of horses, including stud fees, represents 1% of the total output. • This may seem low because it does not include veterinary services, food and retail services, and other aspects of tourism.

  5. What is the economic importance of agriculture? • We are going to look beyond simple output or market value and look at the direct, indirect, and induced effects from producing agricultural commodities in Fayette County.

  6. The theory of multipliers • Multipliers measure total change throughout the economy from a one unit change for a given sector. • Three types of multipliers • Output – Revenue • Employment • Income

  7. Type II multiplier • Includes direct or initial spending • Includes indirect spending or businesses buying and selling to each other • It also includes household spending based on the income earned from the direct and indirect effects – the induced effects. These are the employees spending on goods and services

  8. Multipliers applied to agriculture in Fayette County and Kentucky

  9. An interpretation of the multipliers • Employment Multiplier 1.51 • For every $1 Million spent for agricultural production, a total of 32.46 new jobs are created. This includes 21.55 jobs from the direct effects, 6.5 jobs from the indirect effects, and 4.41 from the induced effects. • Income multiplier: 2.14 • When the agriculture sector realizes a $1 change in income, total income in the study area changes by $2.14 from direct and indirect linkages

  10. Multipliers applied to the equine industry in Fayette County and Kentucky

  11. An interpretation of the multipliers • Employment Multiplier 1.21 • For every $1 Million spent for agricultural production, a total of 27.7 new jobs are created. This includes 22.9 jobs from the direct effects, 3.2 jobs from the indirect effects, and 1.6 from the induced effects. • Income multiplier: 2.26 • When the agriculture sector realizes a $1 change in income, total income in the study area changes by $2.26 from direct and indirect linkages

  12. A comparison of agriculture with other industries

  13. A comparison of agriculture with other industries

  14. Consequences of Developing Land • Proposal is to develop 7,000 acres of land in Fayette County • Assuming each of those acres is dedicated to horse-related agriculture, $10.7 Million dollars would be the direct loss and $14.8 million would include all direct, indirect and induced effects associated with the loss of land.

  15. Employment and Income Consequences • 297 workers would be laid off • There would be a $2.6 Million reduction in income

  16. What if all of the 7,000 acres were committed to residential development? • Employment multiplier: 2.00 • Income multiplier: 1.91 • Employment multiplier is higher for residential development but the income multiplier is slightly higher for the horse industry.

  17. Other equine related activities to consider • Veterinary Services: $80 Million • Spectator Sports: $67 Million • Food Services & Drinking Places: $753 Million • Hotels and Motels: $91 Million • Gambling: $38 Million

  18. Conclusion • There would be a significant negative impact on the equine industry if 7,000 acres are developed. • It is unclear, in economic terms, if the benefits from development, i.e. new jobs and income gain would outpace these same types of losses from agriculture • Other issues must considered: the infrastructure surrounding the land and the alternative uses of the land.

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