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Rice Backgrounder / RCS-2006-01

Economic Research Service/USDA

United StatesDepartmentof Agriculture

www.ers.usda.gov

Outlook Report from the Economic Research Service

RCS-2006-01December 2006

Rice Backgrounder

Abstract

U.S. rice farming is a high-cost,large-scale production operation that depends on theglobal market for about half its annual sales. Government payments per acre are highcompared with other program crops,as is the share of the sector’s income accounted forby payments. While domestic disappearance of rice continues to increase,the outlook for rice farm incomes is tempered by higher production costs,modest increases in farmprices,and continued strong competition in many international markets from lower costAsian exporters. Financial and operating characteristics of U.S. rice farms,based on the2004 Agricultural Resource Management Survey (ARMS),are reported here.

Keywords:

United States,rice,domestic disappearance,supply,trade,policy,income,expenses,government payments,trade agreements

Acknowledgments

Thanks to Janet Perry,Demcey Johnson,Linwood Hoffman,Paul Westcott,EdwinYoung,and Robert Dismukes,Economic Research Service,USDA,for their supportand helpful review comments and suggestions. The authors extend thanks for reviewcomments to Tom Tice and Bill Chambers,Farm Service Agency,USDA; AndyAaronson,World Agricultural Outlook Board,USDA; Stephanie Murphy andMichelle Moore,Foreign Agricultural Service,USDA; Eric Wailes,Department of Agricultural Economics and Agribusiness,University of Arkansas; Michael Salassi,Department of Agricultural Economics and Agribusiness,Louisiana State University;and Bobby Coats,Cooperative Extension Service,University of Arkansas. Finally,special thanks is extended to Dale Simms and Cynthia A. Ray,Economic ResearchService,for editorial,production,layout,and graphic assistance.

Nathan ChildsJanet Livezey

Introduction. . . . . .2The U.

.Rice Indu

-try and GlobalMarket—A BriefDe

cription . . . . . .3U.

. . .14Pricin

,and Ri

. . . . .23Current PolicyOverview . . . .. . .27Farm Bill I

from a Dome

tic and Trade PolicyPer

pective . . .. .31Reference

. . . . .37Appendix 1. . . . .38Appendix 2. . . . .43

Approved byUSDA’sWorld AgriculturalOutlook Board

Table ofContents

The U.S. rice farming industry is a high-cost,high-yielding,large-scaleproduction sector that depends on the global market for almost half itsannual sales. While domestic disappearance of rice continues to increaseand U.S. export prospects remain bright,the outlook for rice farm incomesis tempered by higher production costs and continued strong competition inmany international markets from lower cost Asian exporters.Government payments per acre for rice are high compared with most otherprogram crops,as is the share of income accounted for by such payments.As a result,the health and viability of U.S. rice farming could be muchaffected by upcoming farm legislation and global trade policy. Under the2002 Farm Act,the primary government programs affecting rice producersare direct payments,countercyclical payments,and the marketing loanprogram.This report describes the structure and performance of the U.S. rice market,including pricing,marketing,and risk management issues. It also describescurrent farm legislation and global trade policy issues,emphasizingproducer support programs,World Trade Organization commitments,andregional trade agreements. Appendices detail financial and operating charac-teristics of U.S. rice farms based on the 2004 Agricultural ResourceManagement Survey (ARMS).

Rice Backgrounder / RCS-2006-01

Economic Research Service/USDA

Introduction

Rice accounted for just 2 percent of the total value of U.S. field crops from2002 to 2004. Average crop value in those years was $1.44 billion. Rice istypically ranked eighth among U.S. field crops based on both value of production and planted area. In 2002,the Census of Agriculture reportedthat 8,046 farms (out of over 2.1 million total) produced rice. The 2002 cropwas valued at about $980 million.

The average size for rice farms was 397 acres according to the 2002 Census,much larger than corn (196 acres),soybean (228 acres),and wheat (269acres) farms. Among major field crops,only cotton,with an average size of 506 acres in 2002,exceeded the average farm size for rice. Because of thelarge investments required for irrigation facilities,farm sizes and productionlevels for rice have to be large enough to justify such heavy fixed expendi-tures. In the United States,all rice is produced under controlled irrigation,amajor factor behind the high yields achieved.

Arkan

the Lar

t Rice Growin

tate

Virtually the entire U.S. rice crop is produced in four regions:(1) theArkansas Grand Prairie,(2) the Mississippi Delta (parts of Arkansas,Missis-sippi,Missouri,and Louisiana),(3) the Gulf Coast (Texas and SouthwestLouisiana),and (4) the Sacramento Valley of California. The Delta is thelargest producing region. Arkansas contains over 45 percent of U.S. riceacreage and is the largest producing State. California is the second largestproducer,achieving the highest yields. Louisiana is the third largest producingState,typically planting the second or third largest area. Mississippi is typi-cally the fourth largest rice producing State. Along with Missouri and Texas,these six States account for more than 99 percent of U.S. rice production.(Florida accounts for most of the rice grown outside these six States,but it isnot included in USDA’s area and production estimates.)

In 1997,the Census of Agriculturereported 9,627 rice farms out of 2.215million total U.S. farms. The averagesize for rice farms in 1997 was 328acres.

Rice Backgrounder / RCS-2006-01

Economic Research Service/USDA

The U.S. Rice Industry and Global Market—A Brief Description

Fig

re 1

The average farm size for rice is substantially larger than for mostother field crops

Acre

rce: U.

. Dep

rtment of Agric

re, N

tion

l Agric

tic

ervice, 2002Cen

sus

of Agric

re.

CottonRiceWhe

Corn010020030040050060020021997

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USDA: RCS200601

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