Source: LOUISIANA STATE UNIVERSITY submitted to
ECONOMIC ANALYSIS OF RICE PRODUCTION AND FARM MANAGEMENT IN LOUISIANA
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
TERMINATED
Funding Source
Reporting Frequency
Annual
Accession No.
0192321
Grant No.
(N/A)
Project No.
LAB93574
Proposal No.
(N/A)
Multistate No.
(N/A)
Program Code
(N/A)
Project Start Date
Mar 1, 2002
Project End Date
Feb 28, 2008
Grant Year
(N/A)
Project Director
Salassi, M. E.
Recipient Organization
LOUISIANA STATE UNIVERSITY
(N/A)
BATON ROUGE,LA 70893
Performing Department
AGRI ECONOMICS & AGRIBUSINESS
Non Technical Summary
The economic viability of rice production today is influenced by many factors. Production technology, environmental legislation, federal price support and commodity programs and international trade are some of the issues which have a direct impact on the relative profitability of rice production. This project examines how these factors affect the economics of rice production and investigates how alternative production practices and farm management decisions can improve the economic viability of the farming operation.
Animal Health Component
90%
Research Effort Categories
Basic
10%
Applied
90%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6011530301040%
6031530301020%
6101530301040%
Goals / Objectives
(1) Identify and prioritize rice production and farm management issues and problems facing Louisiana rice producers. (2) Develop and maintain a representative set of annual costs and returns estimates for rice and other major crop enterprises grown in the rice producing areas of Louisiana. (3) Evaluate the relative economic feasibility of alternative rice production technologies within a single enterprise context. (4) Evaluate the impact of physical, technological, economic, and farm policy factors on the enterprise mix, resource allocation, and economic performance of rice farms within a whole farm context.
Project Methods
Identification of rice production and farm management issues and problems facing Louisiana rice producers (Objective 1) will be conducted by communication with state rice producer groups such as the Louisiana Rice Research Board, the Rice Advisory Committee of the Louisiana Farm Bureau Federation, the Louisiana Rice Growers' Association, and the Louisiana members of the USA Rice Federation Board of Directors, as well as by communication with extension personnel, experiment station scientists with rice research responsibilities, and other individuals in the rice industry. Primary data necessary to develop enterprise cost and returns budgets for rice and other major crop enterprises in the rice growing areas of Louisiana (Objective 2) will be obtained through periodic surveys of rice producers on an as needed basis. Enterprise budgets will be developed annually using the Mississippi State Budget Generator (MSBG) microcomputer software package. Enterprise budgets for rice and other major crops produced on rice farms will be developed for relevant soil type, tenure arrangement, production technology, and farm size situations. Evaluation of the relative economic feasibility of alternative rice production technologies within a single enterprise context (Objective 3) will encompass an array of studies related to the particular production and management practices used to produce rice in Louisiana. Enterprise budgeting, economic engineering, and risk analysis will be used to estimate the costs and returns and evaluate the relative price and production risks associated with alternative production practices. The evaluation of farm management issues and problems associated with rice production in Louisiana (Objective 4) will analyze the impact of physical, technological, economic, and political factors on the enterprise mix, resource allocation, and economic performance of rice farms within a whole farm context. Enterprise budgeting, economic engineering, mathematical programming, and risk analysis procedures will be used to analyze how various factors identified in Objective 1 will influence the profitability and mix of crops produced on rice farms, the impact on the resources available to rice farms and how they will be utilized in production, and how these factors will affect the economic returns of rice farms over a period of time.

Progress 03/01/02 to 02/28/08

Outputs
OUTPUTS: This project has annually published a report which includes projected production costs for alternative rice production systems in Louisiana. Detailed projected cost budgets were prepared for rice production systems involving conventional tillage and stale seed bed, water planted and drill planted, conventional varieties and herbicide resistant varieties, as well as rice production in a rotation and fallow system. Producer decision tools, in the form of Excel spreadsheets, were developed to aid producers in projecting annual cash flow from rice production as well as to evaluate alternative rice rental arrangements. Economic research was conducted in the areas of fertililization, land rent, rice produced in rotation with crawfish, farm programs. PARTICIPANTS: M. E. Salassi, PI M. A. Deliberto, Research Associate TARGET AUDIENCES: Rice producers in Louisiana

Impacts
Annual projected production cost values provided rice producers with updated information which was used in planning the farm operation each year as well as in obtaining crop financing. The decision tools developed in the project provided producers with the ability to analyze the impact of farm management decisions on projected net returns with the goal of identifying optimal decision choices. Research on the economics of rice/crawfish rotation provided producers with estimated cost values which the crawfish operation was imposing on the rice enterprise, including loss of ratoon crop income, additional tillage work and additional herbicide costs in rice following a crawfish crop.

Publications

  • Johnson, Gene, Salassi, Michael E., and John K. Saichuk, 'Rice Outlook,' 2007 Outlook for Louisiana Agriculture, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, Staff Report No. 2007-03, pp. 24-26, March 2007.
  • Salassi, Michel E., 'Rice Production Economics Research' 98th Annual Research Report - Rice Research Station, LSU Agricultural Center, pp. 345-347, 2007.
  • Deliberto, Michael A., Michael E. Salassi and Kenneth W. Paxton, 'Fuel and Fertilizer Price Impacts on Crop Mix and Returns in the Louisiana Delta,' Journal of Farm Managers and Rural Appraisers, pp. 89-96, 2007.
  • Salassi, Michael E., and Michael Deliberto, Projected Costs and Returns, Rice, Soybeans, Wheat and Sorghum, Southwest Louisiana, 2007, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, A.E.A. Information Series No. 244, January 2007.
  • Salassi, Michael E., Louisiana Rice Share Rent Evaluation Model, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, Staff Report No. 2007-01, January 2007.
  • Salassi, Michael E., Projected 2007 Rice Farm Cash Flow Model, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, Staff Report No. 2007-02, January 2007.


Progress 01/01/06 to 12/31/06

Outputs
Projected rice production costs were estimated for the 2006 crop year for a variety of rice production situations including water planted, drill planted, conventional variety, herbicide resistant variety, production in rotation and in fallow, as well as production utilizing conventional tillage and stale seedbed. An Excel spreadsheet model was developed for producers to use in evaluating 2006 rice base planting decisions. This model estimated net returns above variable and total rice production costs for specified percentage of rice base acreage planted.

Impacts
Annual estimation of projected rice production costs provides useful information to rice producers as well as financial lenders for production planning. Comparison of estimated costs of alternative rice production systems provides the ability to evaluate current and emerging rice production technologies and the impact that changing input prices have on enterprise net returns. As a farm program commodity with relatively high production costs per acre, the economic profitability of rice production is sensitive to changes in farm program price support. Research output from this project provides information and analysis on the likely impacts on farm profitabilty and net returns from alternative farm program payment options.

Publications

  • Salassi, Michael, 'Louisiana Agriculture: Economically Viable Through Effective Research,' Louisiana Agriculture, pp. 4-5, Summer 2006.
  • Salassi, Michael E., and Janis B. Breaux, Projected Costs and Returns, Rice, Soybeans, Wheat and Sorghum, Southwest Louisiana, 2006, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, A.E.A. Information Series No. 236, January 2006.
  • Salassi, Michael E., '2006 Rice Cash Flow Model,' Rice Research Station Newsletter, LSU Agricultural Center, Vol. 3, Issue 1, February 2006.
  • Salassi, Michael E., ' Rice Production Economics Research,' 2005 Rice Research Station Annual Report, Louisiana State University Agricultural Center, pp. 406-407, 2006.
  • Johnson, Gene, Michael E. Salassi, and John K. Saichuk, 'Rice Outlook,' 2006 Outlook for Louisiana Agriculture, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, pp. 20-22, March 2006.
  • No, Sung C., and Michael E. Salassi, 'Dynamic Analysis and Forecasts of Rough Rice Price under Government Price Support Program: An Application of Bayesian VAR,' selected paper abstract, Journal of Agricultural and Applied Economics, Vol. 38, No. 2, p. 457, August 2006.
  • Salassi, Michael E., and Brian Roule, 'Evaluating the Impact of Increased Fuel and Fertilizer Prices on 2006 Rice Base Planting Decisions,' selected poster abstract, Journal of Agricultural and Applied Economics, Vol. 38, No. 2, p. 472, August 2006.
  • Salassi, Michael E., 'Federal Budget and Input Price Impacts on Louisiana Rice Planting Decisions and Enterprise Cash Flow,' Proceedings of the 31st Rice Technical Working Group, 2006, LSU Agricultural Center, p. 83.
  • Salassi, Michael E., 'Producer Decision Tool for Evaluation of Rice Base Planting Decisions,' Proceedings of the 31st Rice Technical Working Group, 2006, LSU Agricultural Center, p. 88.


Progress 01/01/05 to 12/31/05

Outputs
Enterprise budget projections for 2005 were developed for alternative rice production systems. Rice production costs were estimated for the following types of rice production systems: water planted, drill planted, conventional variety, Clearfield variety, conventional tillage, stale seedbed, in rotation, and fallow land. Base yield levels were 57.0 cwt. per acre for water planted rice and 60.0 cwt. per acre for drill planted rice. Total rice production costs for a tenant operator using a water planted, conventional variety, conventional tillage system in rotation with another crop was estimated to be $9.46 per cwt. at a 57.0 cwt. yield level. This production system on fallow land rotation added $0.42 per cwt. to production costs, resulting from additional disk operations in the year prior to planting. Stale seedbed production systems in water planted rice had similar production cost levels compared with conventional tillage. Total production costs for stale seedbed, water planted rice in rotation was estimated at $9.22 per cwt., $0.24 per cwt. less than conventional tillage. Production costs associated with production of Clearfield rice were estimated to be slightly higher than conventional varieties, due primarily to higher seed prices. Clearfield production costs were estimated at $9.85 per cwt. for conventional tillage in rotation and $10.28 per cwt. for conventional tillage of rice production on fallow land. A study was conducted to analyze the impacts of proposed reductions in farm program spending, as part of the federal budget reduction, on representative rice and cotton farming operations in Louisiana. Four policy scenarios are simulated in this analysis: (1) Baseline scenario: continuation of current policy, (2) Scenario 1: five percent reduction in total direct payments, counter cyclical payments and marketing loan program benefits, (3) Scenario 2: Loan deficiency payments paid on 85 percent of direct payment program yields, (4) Scenario 3: combination of the two payment reduction proposals. General conclusions from the study: (1) A five-percent reduction in program payments would reduce rice and cotton gross farm income by 1.1 to 1.2 percent. Net farm income (returns above total costs) would be reduced by more than 20 percent. (2) Loan deficiency payments paid on 85 percent of direct payment program yield (rather than actual production) would reduce rice and cotton gross farm income by approximately 2.5 percent. Net farm income would be reduced by more than 40 percent for rice enterprises and by more than 50 percent for cotton enterprises. (3) Both payment reduction proposals together would reduce gross farm income for rice and cotton enterprises by 3 to 4 percent. Net farm income would be reduced by more than 60 percent. (4) Although elimination of the 3-entity rule was not specifically evaluated in this study, results for the one-entity crop enterprises analyzed here show that rice and cotton production enterprises of this size are not economically viable in the long run, given the inability to profitably expand acreage to lower fixed costs.

Impacts
Annual estimation of projected rice production costs provides useful information to rice producers as well as financial lenders for production planning. Comparison of estimated costs of alternative rice production systems provides the ability to evaluate current and emerging rice production technologies. As a farm program commodity with relatively high production costs per acre, the economic profitability of rice production is sensitive to changes in farm program price support. Research output from this project provides information and analysis on the likely impacts on farm profitabilty and net returns from alternative farm program payment options.

Publications

  • Salassi, Michael E., "Rice Marketing: More Than Just Watching Price," Louisiana Farm and Ranch Magazine, August 2005, pp. 6-7.
  • Salassi, Michel E., "Rice Production Economics Research" 96th Annual Research Report - Rice Research Station, LSU Agricultural Center, pp. 400-402, 2005.
  • Salassi, Michael E., Projected 2006 Rice Farm Cash Flow Model, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, Staff Report No. SP2005-05, August 2005.
  • Paxton, Kenneth, and Michael Salassi, Effect of Higher Fuel Prices on Machinery Costs, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, Staff Report No. 2005-06, August 2005.
  • Salassi, Michael E., and Janis B. Breaux, Projected Costs and Returns: Rice, Soybeans, Wheat and Sorghum, Southwest Louisiana, 2005, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, A.E.A. Information Series No. 228, January 2005.
  • Johnson, Gene, Michael E. Salassi, and John K. Saichuk,"Rice Outlook," 2005 Outlook for Louisiana Agriculture, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, Staff Report No. SP2005-02, pp. 22-24, February 2005.
  • Salassi, Michael E., and Kenneth W. Paxton, The Presidents Agricultural Spending Budget: Implications of Selected Proposals on Louisiana Rice and Cotton, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, Staff Report No. 2005-02, April 2005.


Progress 01/01/04 to 12/31/04

Outputs
Projected 2004 rice production costs were estimated for alternative rice production systems and situations in Louisiana, including water planted versus drill planted, conventional tillage versus stale seed bed, conventional variety versus herbicide resistant varieties (Clearfield) and rice production in rotation with another crop and in a fallow rotation program. A SAS program code was developed to generate multivariate empirical probability distributions used in farm level simulation work. This program allows for the simulation of random farm level prices and yields across commodities and over time. An analysis of rough rice price transmission asymmetry in Louisiana milled rice price was completed in 2004. Using data from the 1987/88 to 2001/02 marketing years and a momentum-threshold autoregressive model, results indicated that Louisiana mill prices convered toward long-run equilibrium, but responded differently to negative deviations than to positive deviations. A hedonic pricing model was used to evaluate effects of quality factors on Louisiana rough rice prices. Results indicated that current government grading is quite limited in explaining price variation in Louisiana rough rice and that a more diverse grading system would enhance the importance of rice grades since more than 60 percent of the observations were clustered between grades 2 and 3.

Impacts
The general objective of this project is to conduct economic evaluations of factors impacting the economics of rice production in Louisiana. Research conducted in 2004 focused on (1) estimating current rice production costs, which are used extensively by producers, financial lenders policy makers and others, (2) evaluating the rough rice grading system and (3) the impact of quality factors on rough rice price, results of which provide information on the determination and level of rice prices received by producers in the domestic U.S. market.

Publications

  • No, Sung Chul, Hector O. Zapata, Michael E. Salassi, and Wayne M. Gauthier, "Asymmetry in Farm-Milled Rice Price Transmission in the Major Rice Producing States in the U.S.," Journal of American Academy of Business, Cambridge, 4 (1-2): pp. 460-463, March 2004.
  • Salassi, Michael E., and Janis B. Breaux, Projected Costs and Returns, Rice, Louisiana, 2004, LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, A.E.A. Information Series No. 219, January 2004.
  • Johnson, Gene, Mike Salassi, and John Saichuk, "Rice Outlook," 2004 Outlook: Louisiana Agriculture," LSU Agricultural Center, Dept. of Agricultural Economics and Agribusiness, Staff Report SP2004-03, pp. 20-21.
  • No, Sung Chul, and Michael E. Salassi, Multivariate Empirical (MVE) Probability Distributions in Farm-Level Risk Assessment and Policy Analysis: An Implementation of SAS Procedures, LSU Agricultural Center, Department of Agricultural Economics and Agribusiness, Staff Report No. SP2004-09, July 2004.
  • Salassi, Michel E., "A SAS/OR Primer on Using PROC LP," Conference Proceedings: South Central SAS Users Group Annual Conference, November 7-9, 2004, Austin, TX, pp. 364-377.
  • Salassi, M.E., "Rice Production Economics Research," 95th Annual Research Report - Rice Research Station, LSU Agricultural Center, pp. 458-460, 2004.
  • Salassi, Michael E., Wayne M. Gauthier, April Street, and Sung C. No, "Factors Influencing Rough Rice Storage Decisions for Louisiana Rice Producers," Proceedings: 30th Rice Technical Working Group, 2004, Rice Research Station, LSU Agricultural Center, Crowley, LA pp. 92-93.
  • No. Sung C., Michael E. Salassi and Wayne M. Gauthier, "Rough Rice Price Transmission Asymmetry in Louisiana Milled Rice," Proceedings: 30th Rice Technical Working Group, 2004, Rice Research Station, LSU Agricultural Center, Crowley, LA, p. 90.
  • No, Sung C., Michael E. Salassi and Wayne M. Gauthier, "Econometric Analysis of Effects of Quality Factors on Louisiana Rough Rice Prices," Proceedings: 30th Rice Technical Working Group, 2004, Rice Research Station, LSU Agricultural Center, Crowley, LA, p. 91.
  • No, Sung, Michael E. Salassi, and Wayne Gauthier, "Examining Efficiency of Governmental Grading in a Hedonic Price Model for Louisiana Rough Rice," Journal of Agricultural and Applied Economics, published selected paper abstract, Vol. 36, No. 2, p. 512, August 2004.
  • Hinson, Roger A, Dixie W. Reaves, Michael E. Salassi, and Wes Harrison, "Biotechnology Impacts on Rice Production and Consumption," Journal of Agricultural and Applied Economics, published organized symposia abstract, Vol. 36, No. 2, p. 528, August 2004.


Progress 01/01/03 to 12/31/03

Outputs
Research activities in this project in 2003 focused on rice production cost estimation, evaluation of share rental arrangements, and estimated costs of precision land leveling for zero-grade rice production. Projected rice production costs were estimated for Louisiana rice production systems including water-planted and drill-planted with conventional tillage and stale seedbed systems. Equitable rice share rental arrangements were evaluated by identifying those productin costs paid by the landlord and those paid by the producer. Typical rice share rental arrangements included 67%/33% and 80%/20% (producer/landlard share). Costs of precision grading rice land to zero grade were estimated. Costs varied by quantity of soil moved per acre and ranged from $89 per acre for 100 cubic yards to $168 per acre for 300 cubic yards.

Impacts
The general objective of this project is to conduct economic evaluations of factors impacting the economics of rice production in Louisiana. Research conducted in 2003 focused on production costs, equitable rental arrangements and precision land grading costs, all of which are critical factors in the profitable production of rice.

Publications

  • Michael E. Salassi, "Projected Costs and Returns - Rice, Louisiana, 2003," Department of Agricultural Economics and Agribusiness, Louisiana Agricultural Experiment Station, LSU Agricultural Center, A.E.A. Information Series No. 210, February 2003.
  • Johnson, Gene, Mike Salassi, and John K. Saichuk, "Rice Outlook," 2003 Outlook for Louisiana Agriculture, February 2003.
  • Salassi, Michael E., "Rental Rates: Value of Inputs Contributed by Both Parties is Key to Fair Rice-Share Rental Agreements," Rice Journal, February 15, 2003, pp. 10-11.
  • Salassi, Michael E., "Precision Land Forming: Zero-Grade Rice Production Increases Irrigation Efficiency and Reduces Water Use," Rice Journal, May 15, 2003, pp. 14-15.


Progress 01/01/02 to 12/31/02

Outputs
Research activities under this project in 2002 focused on three major areas: (1) estimation of rice production costs, (2) evaluation of the 2002 farm bill, and (3) economic evaluation of alternative rough rice marketing/storage strategies. Enterprise budget projections for rice production in Louisiana for 2002 were published early in the year. Direct (variable) production expenses for tenant-operators producing rice under a water-planted conventional tillage system in Southwest Louisiana were estimated at $332 per acre, or $9.12 per cwt. at a base level yield of 52 cwt. per acre and a 30 percent crop share for land and water. Total specified expenses were estimated at $381 per acre or $10.48 per cwt. Several activities were conducted during 2002 as part of the evaluation of the 2002 farm bill. Publications were developed which explained different aspects of the new bill. An Excel spreadsheet was developed and put on the Internet for producers and landowners to use in making farm base acreage and yield update decisions. The spreadsheet was widely utilized, not only in Louisiana, but across the country. A research study was completed in 2002 which evaluated alternative rough rice marketing and storage decisions. Mathematical programming and simulation techniques were used to evaluate over 2000 different storage and selling strategies. This work will be continued in 2003.

Impacts
This project seeks to address all factors which have a direct impact on the economics of rice production in Louisiana. The three major areas of work in this project during 2002 (estimation of rice production costs, evaluation of 2002 farm bill options, and evaluation of rough rice storage and selling strategies) provided rice growers with information on how they might organize and operate their farming operation in an efficient and economically profitable manner.

Publications

  • Salassi, M. E., S. C. No, and A. Street, "Evaluation and the Timing of Rough Rice Marketing and Storage Decisions," Proceedings: Twenty-Ninth Rice Technical Working Group, Louisiana State University Agricultural Center, Louisiana Agricultural Experiment Station, 2002, p. 70.
  • Salassi, M. E., "Rice Production Economics Research," 93rd Annual Research Report: Rice Research Station, Louisiana State University Agricultural Center, 2001, pp. 515-517.
  • No, Sung Chul, Hector O. Zapata, and Michael E. Salassi, "Combining Annual Econometric Forecasts with Monthly ARIMA Forecasts for Louisiana Rough Rice Prices," (abstract), Journal of Agricultural and Applied Economics, 34(2), August 2002, p. 368.
  • Guidry, Kurt, and Michael E. Salassi, 2002 Farm Bill - Base Acreage and Program Yield Update Decision Tool: A Users Guide, LSU Agricultural Center, Department of Agricultural Economics and Agribusiness, Staff Report No. 2002-02.
  • No, S. C., M. E., and H. O. Zapata, "USDA Announced World Rough Rice Price Leadership of Louisiana Rough Rice Prices," Proceedings: Twenty-Ninth Rice Technical Working Group, Louisiana State University Agricultural Center, Louisiana Agricultural Experiment Station, 2002, p. 65.
  • Salassi, Michael E., General Commodity and Conservation Provisions, 2002 Farm Bill Information Sheet 1, May 2002.
  • Salassi, Michael E., Updating Farm Base Acreage and Payment Yield, 2002 Farm Bill Information Sheet 2, May 2002.
  • Salassi, Michael E., Rice Base Acreage and Payment Yield Update Options, 2002 Farm Bill Information Sheet 3, May 2002.
  • Paxton, Kenneth W., and Michael E. Salassi, Cotton Base Acreage and Payment Yield Update Options, 2002 Farm Bill Information Sheet 4, May 2002.
  • Salassi, Michael E., and Kyle L. McCann, " Base and Yield Update: Evaluate Program Crop Base Changes From a Whole-Farm Perspective," Rice Journal, Vol. 105, No. 6, June 15, 2002, pp. 17-19.
  • Salassi, Michael E., Marisa L. Zansler, and G. Grant Giesler, "Adoption of Rice Field Preparation Practices to Manage Soil Sediment in Surface Water," Journal of Sustainable Agriculture, Vol. 21, No. 1, 2002, pp. 99-112.
  • Salassi, Michael E., Projected Costs and Returns - Rice, Louisiana, 2002, Department of Agricultural Economics and Agribusiness, Louisiana Agricultural Experiment Station, LSU Agricultural Center, A.E.A. Information Series No. 201, January 2002.
  • Johnson, Gene, Mike Salassi, and John K. Saichuk, "Rice Outlook," 2002 Outlook for Louisiana Agriculture, February 2002.
  • Salassi, Michael E., Impact of H.R. 2646 and S. 1731 Conference Farm Bill Proposals on Projected 2002 Rice Program Payments to Major Rice-Producing States, Department of Agricultural Economics and Agribusiness, Louisiana Agricultural Experiment Station, LSU Agricultural Center, Staff Report 2002-02, April 2002.
  • Salassi, Michael E., " Production Costs: Knowing Production Costs Helps Make Sound Production Decisions," Rice Journal, Vol. 105, No. 4, April 15, 2002, pp. 10-11.