Agricultural and Food Policy
 Agri Outlook Radio
Number 199
Policy/Farm Act: Part 3. The 2008 Farm Bill’s Impact on U.S. Rice Producers, Counter-Cyclical Payment and Concluding Comment (3:48 minutes)
Audio/Video Script:
Robert Coats, Ph.D.
Extension Economist and Professor
University of Arkansas, Division of Agriculture
This is Robert Coats Extension Economist University of Arkansas Division of
Agriculture.
Part 3 - The New Farm Bill’s Impact on U.S. Rice Producers
Looking at counter-cyclical payments these payments were continued from the
2002 farm bill. It provides support counter to the cycle of market prices as
part of a “safety net” in the event of low deflationary global rice prices. The
rice counter-cyclical payment is only issued if the effective rice price is
below the rice target price.
The rice counter-cyclical payment rate is the amount by which the rice target
exceeds the effective price. The effective rice price equals the direct payment
rate plus the higher of: first, the national average market price received by
producers during the marketing year; or second, the national loan rate for the
commodity. The long grain and medium/short grain target price is $10.50 per cwt,
the loan rate is $6.50 per cwt, and the direct payment is $2.35 per cwt.
Subtracting the long grain or medium/short grain loan rate ($6.50 per cwt) and
direct payment ($2.35 per cwt) from the target price ($10.50 per cwt) then gives
you the maximum possible per unit counter-cyclical payment of $1.65 per cwt.
The total possible rice counter cyclical payment for a producer on a farm
equals 85% of the farm’s base acres times the farm’s counter-cyclical payment
yield times the counter-cyclical payment rate.
An alternative to the traditional counter-cyclical payment for rice producers
was established in the 2008 farm bill. It is called the Average Crop Revenue
Election (ACRE) program. This program does not start until 2009. It is probably
best to limit comments on this program until the final regulations are written
later this year.
2002 farm bill payment limits for direct payments, counter-cyclical payments,
and loan deficiency payments remain in place for 2008 along with the 3-entity
rule, but will change significantly for 2009-2012.
The farm bill’s impact on U.S. rice producers will be determined by the
strength or weakness in the global economy and by fairness or lack of fairness
in the global trade talks. Time and time again during the farm bill debate
Senators and Representatives from rice and cotton states presented their
concerns that the loss of global economic momentum could cause commodity prices
to tumble, and stressed the limitations of the 2008 farm bill safety net
compared to the strength of the 2002 farm bill safety net.
This has been Robert Coats Extension Economist University of Arkansas
Division of Agriculture.
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