Agricultural and Food Policy
 Agri Outlook
Radio
Number 90
Policy: Part 3. Rice and Cotton Sector Considerations As the Senate Debates the New Farm Bill (4:43 minutes)
Audio/Video Script:
Dr. Bobby Coats
Extension Economist
University of Arkansas, Division of Agriculture
Part 3, rice and cotton sector considerations as the Senate debates the new
farm bill. I’m Bobby Coats Extension Economist University of Arkansas Division
of Agriculture.
Understand the following continued:
- Rice and cotton production costs have risen dramatically since 2002 giving
even our best producers cash flow concerns and making them extremely sensitive
to policy changes that negatively impact their operations.
- Strong global growth and damaging weather events since 2002 have
dramatically increased rice and cotton producer’s cost of production. Couple
this with farm policy and trade uncertainty, volatile and uncertain
commodity prices and one can begin to understand our producers’
financial and policy sensitivity and concerns about their future.
- Our best producers are uneasy about their future. If our best producers
have concern, then the remaining 2/3’s have real adjustments to make. Per
unit costs must be managed to remain competitive.
There are numerous ways to access the financial health of our rice
and cotton producers. Given today’s farm business setting then I believe
that the following indicates the financial challenges these operations
face.
I consider the following typical of the top third of Arkansas rice
farms. It is my opinion that this operation has the capability to
survive the most damaging economic or policy trauma.
In 2002 this farm spent $14.71 per
acre on fuel expenditures and in 2006 the cost was $59.19 per
acre or a 302% increase. The per gallon increase in the cost of
fuel amounted to 144%. Even with drought conditions and
management practices contributing to increased energy use the
energy cost increase due to rising energy prices were and
continue to be staggering.
Total actual costs less debt costs,
family living, and taxes were up 43% for rice and up 47% for
soybeans from 2002 through 2006.
A financial analysis of the operation
using average farm market prices for marketing periods 2002
through 2006 showed the following:
2006 Cash Surplus of $4.75
per acre
2005 Cash Surplus of $12.34
per acre
2004 Cash Surplus of $0.01
per acre
2003 Cash Deficit of -$15.50
per acre
2002 Cash Deficit of -$17.21
per acre
A financial analysis of the operation
using a strong farm marketing program for marketing periods 2002
through 2006 showed the following:
2006 Cash Surplus of $18.01
per acre
2005 Cash Surplus of $24.77
per acre
2004 Cash Surplus of $4.50
per acre
2003 Cash Surplus of $3.50
per acre
2002 Cash Surplus of $2.29
per acre
To conclude this section, the farm business challenges that our rice and cotton producers are
now experiencing are the most challenging they’ve experienced. Change
and reform are happening; policy that accelerates change will be very
disruptive if not destructive to these farm businesses.
Producers have an array of options when considering their future,
some of which are increased productivity; expansion; aggressively expand
into grain and confinement operations and/or fruit, nut, and vegetable
operations; another occupation; additional off farm income; and
retirement.
This has been Bobby Coats Extension Economist University of Arkansas Division
of Agriculture.
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