SIC 0112
RICE



This industry consists of establishments primarily engaged in the production of rice, or whose sales of rice account for 50 percent or more of the total value of sales for their agricultural production.

NAICS Code(s)

111160 (Rice Farming)

Industry Snapshot

Rice farms in the United States grew to almost 9,300 in the 1990s. With more than three million acres harvested annually, rice production remains stable. However, prices were falling during the early 2000s in the wake of record crop production and supply levels. For the 2002-03 season an estimated 3.2 million acres of rice were planted in the United States, yielding a projected record 6,611 pounds per acre. Rice production is measured by the hundredweight (cwt). One cwt equals 100 pounds. Production in the 2002-03 season was projected to reach 212 million cwt. Based on a projected season-average farm price (SAFP) of $3.70-$4.00 per cwt, the value of rice production was expected to reach at least $784 million. The United States is a relatively small player in the world market for rice. According to the U.S. Department of Agriculture (USDA), Asian nations represent some 90 percent of rice production and consumption, while the United States produces less than 2 percent of total output.

Background and Development

Although rice is not considered a major American crop, the American rice industry is more than 300 years old. Rice was introduced in America around 1685, when a British sea captain, John Thurber, brought a load of the grain to the colonies from Madagascar. Rice first appeared as a commercial crop in the Carolinas in the seventeenth century. After peaking in the mid-nineteenth century, rice production in South Carolina and Georgia began to decline as a result of the Civil War, bad weather, and increasing competition from Louisiana. The industry began to shift toward plantations along the Mississippi River where steam-powered river pumps provided a more efficient irrigation system than the Carolina tidal gates. Soon thereafter, the industry developed in the milling and shipping center of New Orleans and grew rapidly and independently amid the explosive transformations of the American industrial economy in the early twentieth century.

Depending largely on government acreage allotment, conservation, marketing, and loan and deficiency payment programs, which adjust incentives annually to control production, between 2.5 and 3.5 million acres of U.S. farmland have been used for rice cultivation annually. Most of this land was in the Mississippi River Delta in Louisiana, Arkansas, Mississippi, and Missouri. Texas and California provided the two other major rice-farming centers, with Florida adding marginally to the total.

Because of its capital intensive nature and its extensive use of irrigation and canal systems, the rice industry naturally aligned itself to the technological progress of the industrial revolution and modernized much faster than the cotton and sugar industries. In addition, the industry's development of a coordinated network among its various milling interests, distributors, and broker/agents, was a useful organizational model for other southern agricultural industries. The modern rice industry has concentrated far more on distribution and marketing channels than on production.

With a growing year spanning from August to July, modern rice production has been aided by the use of land plans that till and level the soil, creating fields that slope slightly for uniform flooding and controlled draining. Rice farmers also have relied on lasers to determine where to place water control levees. Sowing has been facilitated by the use of seed drills and airplanes in the early spring. During the growing season, rice must be kept constantly in a water depth of two to three inches. Rice producers also apply fertilizer from airplanes to yield consistent and healthy crops. After the rice matures, the fields are drained. At harvest time, farmers use combines to cut rice, separate the grain from the stalk, and convey the grain into trucks. The trucks then transport the grain to dryers where warm air removes moisture until the product is ready for shipment to rice mills.

Domestic consumption of rice subsumes three primary uses: direct food use, processed food use, and beer production use. Direct food use has constituted the largest segment of rice consumption at 58 percent of overall use. Growing over the years, processed food use has accounted for 25 percent of total domestic rice consumption. In this market, use in cereal has long been the highest, making up 44 percent of the processed food division. Other noteworthy processed foods containing rice include candy bars, soups, and crackers. Finally, beer production constitutes 17 percent of total domestic consumption.

In the mid- to late 1990s, U.S. rice production accounted for approximately two percent of the world total with annual sales consistently over $1 billion. The United States has ranked tenth as a producer of rice and second, behind Thailand, as an exporter of rice, averaging around 20 percent of the annual world export market share for many years, until India's emergence as a major rice exporter in 1995. After India's foray into the export market, the United States became the third leading exporter. With a small but expanding domestic consumption base, the industry has, from its inception, relied heavily on foreign markets in selling its high quality rice varieties. During the 1980s, Latin America became the largest customer for American rice; however, lower prices and proximity began to favor Thailand and other exporting countries in the competitive European, North African, and Asian markets. As Americans became increasingly health conscious in the 1980s, domestic consumption of rice began to rise. Use of rice in processed foods such as cereals and candy also contributed to the increased consumption of rice. Breweries have also used rice consistently as a cereal adjunct for making beer. By 1991, domestic use had actually overtaken exports as a proportion of total annual rice production. In 1995, domestic per capita rice consumption climbed to its all time high: nearly 25 pounds per capita—up almost 10 pounds from its 1985 level. With stiff competition worldwide from less expensive rices, American rice producers have begun concentrating increasingly on national demand as domestic prices often exceed international prices, forcing competitors to characterize the United States as a residual rice exporter.

As rice related legislation became increasingly crucial, the USA Rice Federation formed in 1994 to represent the industry and to lead policy making, research, education, and efficiency initiatives and endeavors to benefit all segments of the industry. In 1996 President Clinton signed the long-anticipated landmark Federal Agriculture Improvement and Reform Act, the so-called "freedom to farm" bill, which called for the incremental reduction of farm subsidies over a seven-year period, after which government income support would cease altogether. Before, the government had issued subsidies to producers who agreed not to plant an overabundance of rice and other grains. With this piece of legislation, the government paid subsidies to farmers whether or not they planted anything for the seven-year transition period.

Rice producers confronted the intended transition from government income support to becoming independent by devoting increased attention and effort to advancing rice production technology and efficiency, i.e., to developing methods for yielding larger crops with less effort, using less acreage. These moves, rice producers hoped, would stabilize the volatility of the coming farming age and counteract losses incurred from the loss and diminution of farm subsidies.

During the late 1990s, rice production efficiency continued to increase. The 1998 growing year, although not as productive as 1997, yielded almost 5,900 pounds per acre. With surplus supplies of rice and low domestic prices, U.S. rice exports increased to 85.2 million hundredweight (cwt) in 1998.

Current Conditions

The trend of market dependence that began in the early 1990s shifted directions in the early 2000s with the passage of the Farm Security and Rural Investment Act of 2002. Prior to this legislation, government assistance to rice farmers had gradually decreased in an effort to wean rice farmers from government subsidies and safety nets and to make them more market dependent. However, the 2002 legislation delayed many of the reforms associated with the "freedom to farm" bill and greatly expanded the level of government support to farmers.

Consumers' Research Magazine criticized the new legislation for its potential negative impact on international trade, explaining that "The new United States farm bill not only will be bad for taxpayers and consumers, but also will seriously undermine the United States' position in future trade negotiations. Despite the United States' commitment to reduce agricultural subsidies during the last multilateral trade round, the new farm bill will increase support for the agricultural sector by about 80 percent over the last farm bill, amounting to an additional $82 billion over the next 10 years."

According to the USDA, 3.04 million acres of rice were harvested in the 2000-01 season, with a yield of 6,281 pounds per acre. In comparison, 3.26 acres were harvested in the 1998-99 season, yielding 5,663 pounds per acre. For the 2002-03 season an estimated 3.2 million acres of rice were planted in the United States, yielding a projected record 6,611 pounds per acre. That season, projected rice exports also reached record levels, at 100 million cwt. This gain represented an annual increase of 6 percent.

Further Reading

Coats, Robert C., and Gail L. Cramer. "Rice Policy." Available from http://ianrwww.unl.edu .

Rippel, Barbara. "Farm Bill Undermines Open Trade—and Consumer Welfare." Consumers' Research Magazine. June 2002.

U.S. Department of Agriculture. Economic Research Service. Estimated Supply, Disappearance, and Price By Type of Rice, U.S. Washington, DC: November 2001. Available from http://ers.usda.gov .

——. Rice: Background. Washington, DC: 23 October 2002. Available from http://ers.usda.gov .

——. Rice Outlook. Washington, DC: 12 November 1998. Available from http://www.ers.usda.gov .

——. Rice: Policy. Washington, DC: 23 October 2002. Available from http://ers.usda.gov .

——. Rice Yearbook—Summary. Washington, DC: 25 November 2002. Available from http://ers.usda.gov .



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