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‘Nobody is being made whole by these payments’

Rising Price Loss Coverage payments for rice and other program crops are drawing attention as Congress prepares to write a new farm bill.

USDA’s latest World Agricultural Supply and Demand Estimates are predicting lower season average rice prices in 2016-17 than in 2015-16, meaning Price Loss Coverage payments in 2017 will likely be higher.

It’s a “good news, bad news” scenario for rice producers in that they need the payments to help offset the low farm-gate prices, but it also brings more attention to government spending when a new farm bill is about the be written.

“I’m getting asked a lot about government payments,” said Joe Outlaw, co-director of Texas A&M University’s Agricultural and Food Policy Center, who makes frequent trips to Washington to testify about farm policy. Dr. Outlaw gave the Outlook for Texas’ Rice Belt at the USA Rice Outlook Conference in Memphis, Tenn.

He noted PLC payments for rice have been rising, primarily because of low rice prices, “but I can assure you nobody is being made whole by these payments,” he said. “None of our budgets for any of these crops is positive.”

Dr. Outlaw said Texas rice plantings bounced back to 193,000 in 2016, an increase of more than 60,000 acres from the 130,000-acre total in 2015.

More water for irrigation

“That has a lot to do with getting water availability in Texas again for certain areas that didn’t have water, and the second thing is that every other crop you can plant in Texas cannot make you any money at all,” he said.

Texas farmers also benefitted from good yields in 2016 with a successful ratoon or second crop helping push the state average up to 8,800 pounds per acre, which was second only to California’s medium-grain yield average of 8,900 pounds per acre.

Other state averages, according to the USDA National Agricultural Statistics Service November Crop Production Report included Arkansas at 7,150 pounds per acre; Louisiana, 6,850 pounds per acre; Mississippi, 7,100 pounds per acre; and Missouri, 6,800 pounds per acre. U.S. farmers nationwide harvested an average of 7,493 pounds per acre, according to NASS.

Although other portions of the 2014 farm bill have drawn criticism for a variety of reasons, the law’s Price Loss Coverage program is working for rice. “But how much money is it actually off-setting?” Dr. Outlaw asked.

He displayed a graph indicating how much the payments have grown as market revenues declined in 2013, 2014 and 2015. (2016 revenues are expected to be higher due to the increased rice acres and yield in Texas.) The PLC payments for 2016 rice acres in Texas could total around $80 million when they are made in the fall of 2017.

Payments on rice base

The 2016 PLC payments won’t all go to farmers who planted rice in 2016 due to a provision in the 2014 farm bill that allows growers to receive payments on the base acres they have while planting another crop or no crop.

From 2010 to 2013, Texas farmers had 544,000 acres of rice base, Dr. Outlaw noted. Since then, that base has increased to 590,000 acres, but Texas producers planted only 190,000 acres of rice in 2016.

“So when you look at how much money other people are getting, it’s a little bit appalling,” he noted. “So some of it may be going to good rice farmers’ pockets – they’re just not planting that rice anymore. But, by and large, we have a lot of land that’s being taken out of production, and these people are getting significant payments based off of prices going down.

“I have had many, many conversations recently with folks in Washington who do not want to pay on base acres anymore, and they want to move to paying on planted. That has its own issues, but when you see something like this it’s hard to argue the money is going to the people who should be getting it.”

Dr. Outlaw discussed the results of interviews that were conducted on three of the nearly 100 representative farms the Agricultural and Food Policy Center surveys each year. The three illustrated how rice farms can be similar and yet very different in how they operate even in the same geographic region.

No positive budgets

The down side is that none of the different budget scenarios the AFPC has generated for these or other farming operations in its representative sampling is in the black in 2015 or 2016.

 “Frankly, we don’t have a single budget that is positive at this point,” said Outlaw. “You could say, well, you showed all those payments that are being made in rice, and what I tell people is there’s not a single one of those payments that makes people whole on what they lost.

“It doesn’t replace all the lost income; it replaces at best 85 percent and that’s if your yield is perfectly correlated. I try to make people understand we’re still in a loss situation. Rice is one of the ‘better’ losses if you want to see it that way because the yield variability or lack of gives people a little more comfort.”

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