‘Rice Supply, Demand and ' Related Government Progra nu £5. f K “ "gxiw NIL. CWT. _ w A" _ _ " Z a’. Ag A 6O , > V~ \ ,<‘\V_'<. m 1__ Q i 1 ' \ _. g E g PRODUCTION E p’ ---- -- oomesnc use 5O __ —--— EXPORTS _ _ l CARRYOVER _ 4° “\/ 3O 2O _ IO o ‘ 193s 1940' |945 nsso 195s h Rough rice. United States, 1934-55 in cooperation with the UNITED STATES DEPARTMENT OF AGRICULTURE TEXAS AGRICULTURAL EXPERIMENT STATION R. D. LEWIS, DIRECTOR, COLLEGE STATION, TEXAS gal/din 250 4eJ/mam/ 1957 Farm Prices and Government Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SUMMARY . The change in production of rice during 1930-54 was influenced more by changes in acrea changes in yield. Changes in yield influenced changes in production more than changes in f 1955-56. ' " ' The United States produces less than 2 percent of the world's rice, but is the third largest >-g_" rice. The United States depends on export markets, to absorb roughly half of the domestic g of rice; domestic disappearance accounts for only about half of total production. ” The ratio of total disappearance to total supply indicates that rice stocks were disposed _I domestic and export channels in proper relation to total production until the 1954-55 crops. S‘ stocks beginning with the 1954 crop resulted from a decline in foreign demand and consequently g States rice exports. n Economic and physical factors affecting the demand for rice are discussed in terms of K relationship. Government programs for rice did not influence rice production until the beginning of the 19 ~ when acreage allotments and marketing quotas were begun. The domestic price was equal to _ than the support price every year except 1951, 1954 and 1955. Price support operations and loan‘ were much greater in 1953-55 than in all other years together. About 9O percent of the rice l i made in 1951. 1954 and 1955. e 5 Acreage allotments and marketing quotas were in effect for only the 1955 and 1956 rice crops; Increased yields could result in lower gross income unless accompanied by increased ---.;i yield and acreage changes should be considered in reducing production. i‘ * The ratio of rice prices to the index of prices paid by farmers exceeded 100 percent every y‘ 1933-55. excepting during 1937-38. Parity prices. however, have indicated that rice prices were except in 1941-47. . a Although government price programs did not influence the control of the rice supply, they c toward stabilizing prices. Producers will continue to use improved production techniques and tof‘ yields as long as they realize a return equal to, or above. the cost of production. ' CONTENTS Summaryu... Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Physical Factors of Production and Rotation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal Physical Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i Soils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ' Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a Principal Rotations Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acreage and Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~ Acreage and Yield Effects on Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i Production Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ; . . . Difficulties in Production Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Analysis of Irrigation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . j . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Domestic and World Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal Domestic Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. A Relation of Domestic Use to Total Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . Considerations Affecting Demand . . . . . .i . . . . . . . . . . . . . . . . . . Highlights of Price Programs Acreage Allotments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Influence of Yield on Gross Income . . . . . . . . . . . . . . . . . . . . . . . . .' Support Price"in Relation to Market Price . . . . . . . . . . . . . . . . . . . . . . . ' . - . ' . - I I I . _ ' I I . I ‘ I D . I . ' . ‘ . ' ‘ ' If Price Support Operations Loan Activities . . . . . . . .;.I11111illiiillililiiillifilililiiilffl f]iiiliiiiiiiliiiiiilii. Rice Prices in Relation to Prices Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .. ‘ l Rice Prices in Relation to-Parity Prices: .3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Influence of Government Programs on Prices . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rice fuppbr, Demanal and Related Government Program; JOHN A. KINCANNON, Assistant Professor I ICE CULTIVATION IN THE UNITED STATES W38 i11- g troduced about 1694. Louisiana, beginning 1718, was the first state to produce rice on a ajor scale. ‘4 Rice production started in Texas bout 1860 but did not reach commercial import- nce until the last decade of the nineteenth entury. Rice became a major crop in Arkansas 1905, in California in 1912 and began to be rown on a commercial scale in Mississippi in 949. Rice production is of primary importance I the southeastern part and in the interior alleys of north-central California, the Grand rairie of Arkansas, the Delta area of Miss- sippi, the coastal region of Southeast Texas and e Southern part of Louisiana, Figure 1, because is the most profitable adapted crop in those Wreas and for which there is a ready market. g Tremendous changes in production technology nd the rapid rise in rice production resulted in ; he increased dependence of American growers on I oreign markets, Figure 2. These changes also i ave created many new problems as well as pportunities for both growers and handlers. , This bulletin, the second in a series of three ublications to evaluate the rice price support rogram, points out some,of the trends in rice roduction and utilization and the possible effects . f government price programs on the rice in- a ustry. The first report of the series was Bulletin 39, Legislation Affecting the Rice Industry, 933-56. The third report will be an economic odel to determine the demand and price struc- ure of the rice economy, including possible ffects of governmental action. PHYSICAL FACTORS OF PRODUCTION AND ROTATION rincipal Physical Requirements The production of rice depends on a relatively igh mean temperature during the growing ason, a dependable supply of fresh water for rrigation, good surface drainage and compara- v- ively level soils with relatively imprevious sub- o1 s. a fr‘ ‘ht These conditions prevail for the most part in he coastal prairies of Southwest Louisiana, outheast Texas, the Grand Prairie of Arkansas, he Sacramento and San Joaquin Valleys of , alifornia and the Delta region of Mississippi. Department of Agricultural Economics and Sociology Figure 1. Rice production in the United States is con-J fined mainly to the coastal region of Southeast Texas. the southern part of Louisiana. the Grand Prairie of Arkansas. the Delta area of Mississippi and the southeastern part and the interior valleys oi north-central California. Soils Rice is well adapted to heavy soils or to sandy loam as long as the subsoil permits minimum seepage. The Crowley silty loam soils in Louisiana and Arkansas are well adapted to rice production and hold water extremely well. The Beaumont and Lake Charles clays in Texas are the typical heavy soils on which rice is grown. The crop also is produced in Northeast Arkansas on the lighter sandy soils that have a relatively im- pervious subsoil. The heavy soils of the valleys in California also are well adapted to the pro- duction of rice. MIL. CWT. IIII 4O IIII lIlI 3O Totol supply IIII 1E" n ' isnLhtmgllllcshllRl 0V‘ 5 5 1 ERRITORE —N15 ‘I . SmPMF- U.S. CONTINENTAL CONSUMPTION O I930 I935 I940 I945 I950 Figure 2. Rice. milled. excluding brewers rice. distribu- tion. United States. 1930-54. 3 1937, the rice acreage exceeded one millio was the first time since 1922-27 that slight i? than one million acres were seeded in ric plantings exceeded one million acres 1918-20, but those are not considered no years. Rice yield remained relatively cgnstanti 1930-39, averaging about 2,100 pounds per; During 1949-56, the yield increased 14 M; amounting to about 2,400 pounds per acre - latter year. Illl '|\ ~ —--— California ----- Arkansas — -_- To"; ----- Louisiana E " J J I ‘ _ Figure 3 shows the average yield per O ' ' ' ' ' ' ' ‘ ‘ ' ' ' ' ‘ ' the four principal rice-producing states. , I930 1935 ‘940 ‘945 ‘950 yield in California has fluctuated more t", Figure 3. Rice, rough, average yield per GCre in 101-11’ the other states. 110111813113, rice yield W38 CO maivr Slflies- 1933-5Zy during 1930-50. Rice yields in Califom » 1 ‘ Texas declined approximately 1,100 and Wfltel‘ pounds per acre, respectively, in 1940-41. f Irrigation water for rice production is sup- plied by wells and canals. Wells furnish about 50 ACREAGE AND YIELD EFFECTSQ; if iiisiir: <>N PRQIWIQN percen 1n e ; , . - _ p rigation Water is obtained from wells. Rice pro- The effect of acreage and_yield_ on duction requires approximately a half inch of year changes 1n production of rice 1s lllustra water per day, or 4 to 10 acre-feet for a _ric_e crop, Figure 4. ' gggigilg; on the type of SO11 and lrrlgatlon The “direct effect of acreage” is the cha ' acreage from 1 year to the ‘next multiplied b Principal Rotation practiees yield of the earlier year. The “direct eff _ _ _ _ _ yield” is the change in yield from 1 year R199 1S rotallad mamly _W 1th beef cat“? 111 next multiplied by the acreage of the earlier Texas and Louisiana; _but 1n some cases 1t 1s The ‘raereevge effect» assumes no change in 1 rotated with cotton, grain sorghum, peanuts, corn from 1 year to the next, ans eenverseb,’ u and green-manure crops. The 111111611331 CTQPS effect” assumes no change 1n acreage. Os grown 111 1013111011 W1th nae 111 Arkansas a1? SOY‘ held constant to determine the effect of the beans, oats and lespedeza. The usual rotation 1n on preduetieIL ~_ California is rice, beans, wheat, beans and rice. The change in rice production will not be =; s ACREAGE AND YIELD to the sum (if both are increases or decr, or the difference (if one is an increase andfj Rice acreage in the United States averaged other a decrease) or the two “effects,” but w‘ close to .9 million during 1930-36, Table 1. In differ approximately by the amount obtain TABLE 1. RICE, ROUGH, U.S. ACREAGE, YIELD AND PRODUCTION, 1930-55 Year Acres Yield per _ Year Acres Yield per V. biqggfillzq planted, pzxliled Production biqégrslrtlg plqntedl vitrified Produe Million _ ' Million Pounds pounds Million Pounds pa ~ ~ 1930 .966 2,093 2,022 1943 1.517 1,929 2 1931 .965 , 2,080 2,007 1944 1.503 2,061 3 1932 .874 2,143 - 1,873 1933 .798 2,123 1,694 1945 1.512 2,028 3, 1934 .812 2,164 1,757 1946 1.595 2,037 3, A 1947 1.719 2,049 3 1935 .817 2,173 1,775 1948 1.826 2,096 '3 1936 .981 2,285 2,242 1949 1.883 2,163 4, 1937 1.116 2,154 2,404 1938 1.076 2,196 2,363 1950 1.632 ' 2,371 , 1*?» g. 1939 i 1.045 2,328 2,433 1951 1.998 2,292 4,5 1952 2.006 2,398 4, ' 1940 1.090 2,248 2,450 1953 2.174 2,408 5, 1941 1.263 1,829 2,310 1954 2.462 2,390 5, 1942 1.490 1,952 2,908 _ , ' “’" 1955 1,853 2,895 5 I ' ‘Acres harvested with respective yields were reported prior to 1937: thereafter acreages and yields were reported on a a basis. t; “U.S. average prices are the result of weighting state marketing year average prices by total sales for each state. For year since 1949-50, an allowance for unredeemed loans is included where the amounts are significant. 4 ACREAGE AND YIELD EFFECTS ON RICE PRODUCTION Ml.CWT “ RmE — I- PRODUCTION I‘ -— +8 +6 +4 +2 0 -2 I I I I I I I 1 I 1 I 1 I I 1 I I l I l I l I930 I935 I940 I945 I950 MIL.CVVT. - »- ACREAGE EFFECT o +8 +6 +4 +2 1 1 1 I 1 I930 I935 MlL.CWT1 I" +2- (J-"""-"lli-J-L‘*]‘1l[llllglr _g-— —4 _ I l I I I I I I I I l I I I I I I I I 1 -I I 1 I930 ‘ I935 I940 I945 .I950 Mamas mom PRECEDING YEAR "cmusz m YIELD TIMES ACREAGE IN PRE- °cmmss m ACREAGE TIMES YIELD IN CEDWG YEA" PRECEDING YEAR *1.Ess THAN .1 MIL. CWT. Figure 4. Effects of changes in acreage and yield on year-Io-year changes in rice production. MIL. CWT. t so: 2O“ canmroven mo savoury-sip. Figure 5. Rice. milled. total _United States supply, 1935-54. multiplying the change in acreage by the change in yield. The following example illustrates this procedure: A Acres Yield Production Year planted per acre . million million pounds pounds 1945 1.512 2,028 3,066 1946 1.595 2,037 3,249 Changes —|- .083 + 9 + 183 The “acreage effect” (the effect of a change in acreage) is .083 x 2,028 11168.3 million pounds. The “yield effect” is 9 x 1.512 I 13.6 million pounds. The sum of two effects is 168.3 + 13.6 I 181.9 million pounds. The change in production will not equal exactly the sum of the two “effects” but will differ approximately by “the product of the two changes; namely, .747 MH:(DNT. 5O U.S. totol 4O 393011 |9§5l 719 Figure 6. Rice. rough. total production. four major states and United States. 1933-54. 6 ~ 5;; s?‘ ‘l; TABLE z. mos, notion. us. SUPPLY. S-YEAR A 31‘ 1933-54 A Supplies’ A i‘ Periodl Beginning Production Imports” stocks _. _ _ _ _ _ 1.000 cwt. - - 1933-34 2.341 13.737 349 i 1 1935-39 2.337 22.434 1.374 1943-44 2.532 27.332 135 1945-49 1.332 35.524 53 1953-54 3.313 53.331 432 ‘Year beginning August 1. “Stock data are incomplete prior to August 1. 1937. 2 ties used in compiling stocks in years beiore 19315,‘ Rice Millers Association data as published in "P; tecting the Price of Rice." Technical Bulletin N6»? Annual Market Summary oi Southern Rice. Sept - (c) Annual Market Summary of California Rice, 3U.S. imports and exports are tor Iuly-Iune years after which they are on an August-Iuly year - Iuly-Iune data prior to 1937 are taken from A? Statistics, 1941: the August-Iuly data for subse are as reported by the Bureau oi Census. million pounds (.083 x 9). Adding the’ the 181.9 gives 182.6 million pounds. Changes in the rice acreage during had a greater effect on production than; in yield, but this effect was considerably; after 1941. With the exception of 1941 i yield had relatively little effect on cf production during 1930-54, Figure 4. change in acreage, however, was in 1951., ,3 ing to .366 million acres over the previo- while yield decreased only 79 pounds per : A the corresponding period. 1.’; '1 Yield influenced production conside :1, 1955, increasing about 21 percent over in 1954. This large increase in yield was primarily by efforts of rice farmers to c‘ sate for a 25 percent reduction in rice = in 1955. PRQDUCTION TRENDS Average production for each 5-year during 1930-54, Table 2, shows a consis - crease. The 1945-49 average was 90 '1 greater than that of 1930-34, and that of was 168 percent greater than the 1930-34 a7 Farm production has increased mark" the past 20 years with carryover and i’ accounting for only a very small percen :5 the total U. S. supply, Figure 5. " Yearly imports during 1934-40 averagj 75 percent of the carryover. However, sin imports have practically stopped while ca has increased rapidly, particularly since Rice growers in the four principal pr, states haveshown a definite tendency to production through increased acreage, m yields or a combinationof the two. The S." States have accounted for most of the incrg; rice production in recent years, Figure i, area between the two top lines in Figure? counts for the balance of production in the South- ern States other than Texas, Louisiana and Ark- ansas; this production was primarily in Mississ- ippi where extensive rice growing began in 1949. DIFFICULTIES IN ‘PRODUCTION ADIUSTMENTS The shift to combined rice made it necessary for most growers to purchase expensive equip- ment. The demand for artificial driers to handle combined rice resulted in the construction of many rice-drying plants. Wartime expansion of acreage required additional irrigation facilities and the purchases of new pumping equipment. Such ‘clapital investments have increased the productive efficiency of the rice industry. The cost of these capital items, however, must be amortized over a long period. A’ reduction in their use because of reductions in acreage and production might lessen the realized net return from their use equal to a corresponding fall in rice prices. Increased capital investments and high fixed costs probably will tend to strengthen efforts toward maintaining volume production. Consequently, growers may not desire to reduce their acreage in spite of the downward movement of prices because as long as an operator realizes a return equal to, or above, cost he expects to continue in production rather than write off his investment as a loss. The lack of profitable alternative uses for land may further discourage shifting land out of rice production. Other economic considerations for the rice industry include action to increase the domestic per capita consumption of rice, regain the export markets by maintaining free _ market prices in line with world prices, find wider uses for rice byproducts, reduce production costs and reduce production to the level of domestic and foreign demand. Analysis ot Irrigation Costs The average Texas rice farmer’s production costs and use of diverted acreage is similar to that of other Southern rice farmers. An analysis was made in 1955 to determine the per-acre cost of producing rice in Texas. The data analyzed concerned the 1954 crop on which no acreage restrictions were imposed. Forty-one rice farmers in 7 of the 22 principal rice-producing counties in Texas were interview- ed regarding the cost of producing an acre of rice. These data are representive of the entire rice area since the counties included were selected at random in the Texas Gulf Coast rice area. Ef- forts were made to; obtain cost data on the basis of a representativécross section of producers ac- cording to size of farm and tenure. Table 3 shows the preharvest and harvest costs of producing an acre of rice. The average cost for the four sources of irrigation water is about $102. In the analysis, the only cost items that were combined were drying and storage. The storage cost was determined by considering an average storage period of 1 month at 25 cents per barrel multiplied by an average of 19.6 barrels per acre. Drying cost was determined at 50 cents per barrel. Most farmers indicated that they contemplate having their own cattle or their landlord’s cattle graze the land diverted from rice production. A few farmers indicated that they would plant some type of grain crop or let the land lie fallow. The majority stated that they would not alter their rice-farming program materially in the absence of marketing quotas. DOMESTIC AND WORLD TRADE Asia produces about 85 percent of the world supply of rice. The United States produces slightly less than 2 percent but ranks third as a rice exporting nation, exceeded only by Thailand and Burma. The United States has little influence on world prices or world trade in rice. Only 4 to 5 percent of the total world production of rice actually enters world trade. Table 4 indicates the amount in terms of milled rice that entered world trade during 1930-55. The peak year was 1939, when all major producing countries, particularly those in Asia, were in full production. A con- siderable reduction in the movement of rice stocks through export channels was inevitable during the war years because of the dislocation of rice production in the larger rice-producing areas of the world. Foreign demand for U. S. rice since the war has afforded rice growers a means of disposing of supplies in excess of domestic requirements. The larger increase in production with a simul- taneous drop in U. S. imports reflected expanding TABLE 3. COST PER ACRE OF PRODUCING“ RICE BY SOURCES OF IRRIGATION IN TEXAS. 1954‘ Item Canals Diesel Nair?“ Electric Preharvest Labor cost — — - — Dollars — — —- — Machine man-hours 1.77 1.77 1.77 1.77 Irrigation man-hours 5.14 5.14 5.14 5.14 Water cost Overhead 8.19 6.85 7.32 Operating 15.06 10.03 6.40 7.61 Machine cost 6.54 6.54 6.54 6.54 Machine operating cost 1.65 1.65 1.65 1.65 Cost of seed 7.94 7.94 7.94 7.94 Cost of fertilizer 10.37 10.37 10.37 10.37 Total preharvest 48.47 51.63 46.66 48.34 Harvest and associated cost Combining 14.85 14.85 14.85 14.85 Hauling 3.96’ 3.96 3.96 3.96 Drying and storing 14.70 14.70 14.70 14.70 Total harvest and associated cost 35.67 35.67 35.67 35.67 Cost of land rent 20.14 20.14 20.14 20.14 Total cost of production 102.32 105.48 100.51 102.79 ‘Canals and sources oi power tor wells: diesel, natural gas and electric. includes one Butane-powered well with investment cost of 12.000. TABLE 4. RICE, MILLED, TOTAI. WORLD EXPORTS, 1930-55 ' World _ World Year exports Year exports Million Million cwt. - . cwt. 1930‘ 139 1943 60 1931 147 1944 51 1932 153 1945 41 1933 150 19462 g2 1934 157 19-47. 1 ' 1935 156 1948 78 1936 153 1949 83 1937 . 151 ~ 1950 88 1938 173 1951 106 1939 193 ' 1952 109 1940 150 1953 99 1941 137 1954 102 1942 79 19553 110 ‘1930-45, the exports are the addition of all the net exports of the different countries taken from volumes of statistics pub- .lished by the Institute of International Agriculture, now known as the Food and Agriculture Organization. For com- parison, the 1938-40 average was 171,889,968 cwt. “Beginning 1946, from Foreign Agricultural Service, USDA. Total exports excluding re-exports, in terms of milled rice. Unable to show any overlap in data except for the 19'38-40 average, which they report as 176,621,086 cwt. “Preliminary. markets and increasing prices in foreign rice markets. Improved production technology and available resources in the U. S. enabled the American rice farmers to satisfy the increased foreign demand for American rice through in- creased production. Japan is by far the greatest importer of rice and exercises considerable influence in determin- ing the level of world prices. World War II dis- rupted production in most of the rice-producing countries in Asia and created a favorable market for exportable surpluses of U. S. rice. The flow of U. S. rice through foreign import channels improved again in 1950 because the Korean War "again disrupted production in the Orient. Rice production since 1952 has reached a normal level in Asia and South America, and the U. S. has suffered a considerable loss in foreign outlets for surplus rice stocks. Although increased rice production during and after the war, combined with high rice prices, has 1935 | H |95o Figure 7. Rice, milled, including broken rice brewers, disappearance, United States, 1934-54. ‘a brought prosperity to U. S. rice produc, critical adjustment period faces rice prod, It is vitally necessary, therefore, that the in examine and reappraise the historical tren domestic rice consumption, exports and p This calls for considering the possibilities o j usting production, improving marketing mi and expanding domestic and foreign marke PRINCIPAL DOMESTIC USES Rice, including whole and broken graij a used as a food in the Home, as a raw materii‘ industry in the manufacture of breakfast cei canned foods and alcoholic beverages, and in amounts as feed for livestock. Byproducts t, rice-milling industry, such as bran and polis used largely as animal feed. Hulls usuallyi; treated as Waste or are burned for fuel i mills. Hulls also are used to some exteil abrasives, insulation material, binder in ce, blocks and as a raw product for the prod of furfural for lacquers and dyes. Domestic consumption has risen slowly, ure 7, with the increase caused mainly increase in population; present per capita, sumption, averaging less than 6 pounds, is t slightly above that of 20 years ago. The av annual domestic use of milled rice during totaled a little over 2O million hundredwi Table 5. Of this total, about 78 percent TABLE 5. RICE, ROUGH, U.S. DISPOSITION, 5-YEAR AVERAGES, 1930-54 " 1 . I Domestic utilization Totayii Period Foo d2 F eed“ Industry‘ Seed d 01:13:21“. Exports P2311316; — — — — — — — — — — — — — 1,000 cwt. — — — — — — — — — — - 1930-34 15,062 284 755 897 16,997 3,098 20,095 1935-39 15,573 514 2,866 1,134 20,087 ' 3,245 23,332 1940-44 15,844 319 2,715 1,581 20,459 7,287 27,746 1945-49 15,342 302 3,914 1,906 21,464 13,483 34,947 1950-54 14,142 237 3,751 2,437 20,567 19,888 40,455 ‘Year beginning August. 2 aFrom CSS and AMS records. ‘Rice used in alcohol and fermented malt liquors as reported by the Bureau of Internal Revenue beginning in 1914. Data. l on a fiscal year basis, 1909-36, thereafter on an August-July year basis. Through 1936, food use is as shown in Table 134, Page 106, Agricultural“ Statistics, 1941, with conversion to rough rice - estimated extraction rate of 68 percent. Beginning August 1937, the dataare from records of_the Grain Division, CSS? Market News Service, Grain Division, AMS, with actual extraction rates, for each year. “Food" includes shipments to tories and military uses at home and abroad. but does not include military relief feeding overseas. k consumed as food or used in the manufacture of food products, and the other 22 percent was used by the brewing industry. The 1950-54 average annual domestic utilization of rice was about 27 percent more than during the 1935-39 period, while the quantity consumed as food declined 10 percent—industry and seed rice accounting for the overall increase. RELATION OF DOMESTIC USE TO TOTAL SUPPLY Table 6 shows the relation of domestic dis- appearance to the total supply of rough rice by 5-year averages and the nature of the flow of rice stocks "through the principal market outlets. These data point up the declining importance of domestic disappearance in absorbing a pro- portionate share of the periodic increases in total supply. - Since per-capita consumption was relatively constant, annual increase in population pre- vented a proportionate decline in the ratio of domestic disappearance of rice to the total supply -production plus carryover. The ratio of domestic disappearance to total supply from 1930-34 shows that for every 100 pounds of the total supply of rice the domestic market absorbed 77 percent, while exports accounted for only 14 percent. The remaining 9 percent was accounted for by ending stocks. The 1940-44 average total supply was 10 percent greater than the 1935-39 average. The ratio of domestic disappearance to total supply for 1940-44 was 69 percent. The change in the ratio of domestic disappearance of rice to total supply can be effected by an increase, decrease or constant per capita consumption; by an increase, decrease or no change in population; or by a combination of the two. The population of the U. S. increased slightly over 4 percent from 1930-34 to 1940-44. If the population had not increased, per capita con- sumption remaining relatively constant, the ratio of domestic disappearance to total supply would have declined as much as total supply increased. Since the ratio declined 8 percent between the two periods, the 4 percent increase in population accounted for only part of the difference. Exports compensated for the larger share absorbed by the domestic outlets, Table 6. How- ever, rice exports had declined in 1954 over previous postwar years, resulting in a slightly smaller ratio during 1950-54 than the 37 percent for the preceding 5 years. The 5 years im- mediately following World War II accounted for all but 5 percent of the ratio of total disappear- ance to total supply. The export markets played a large part in absorbing the increasing production of rice from 1935-39 through 1950-54. Since domestic con- sumption is comparatively constant, the ratio of exports to total supply must increase in pro- portion, to the increase in production if a large carryover of rice stocks is to be prevented. Table 6 shows that the 36 percent in the export ratio column is 1 percent below the preceding 5-year period. It is assumed that if the trend in rice production continues, along with the present rice price program, the figure in column 4 will fall considerably below the 1950-54 figure of 36 percent. This means that the figure in column 7 will decline proportionately and a higher percentage of rice stocks will go into Com- modlty Credit Corporation (CCC) warehouses. The carryover of rice stocks in 1950-54 increased 21 percent over 1945-49. Under the present rice price program, con- tinued acreage reductions may force a large per- centage of small farmers out of rice production. This points up the necessity for expanding domes- tic outlets for rice, intensifying research in new uses for rice and its byproducts, expanding ex- port markets through an acceptable pricing sys- tem and finding alternative uses of land now devoted to rice production. CONSIDERATIONS AFFECTING DEMAND The supply, price and utilization structure for rice is relatively complex. Domestic and world prices and utilization in the various outlets are determined simultaneously by the supply of rice and certain economic factors outside the normal market structure, such as government participation. The economic factors are shown in circles in Figure 8; items that are essentially physical are shown in boxes; and government factors are shown in broken circles. Arrows indicate the major direction of causal effects. The double- TABLE 6. RICE. ROUGH. U.S., RATIO OF TOTAL DISAPPEARANCE TO TOTAL SUPPLY, 5-YEAR AVERAGES, 1930-54 Ratio ot Ratio oi Ratio of P . d Total Domestic domestic E t exports Total total eno supply‘ disappearance disappearance . xpor s to total disappearance disappearance a to total supply supply to total supply 1,000 ciwt. 1.000 cwt. Percent 1,000 cwt. Percent 1,000 cwt. Percent 1930-34 22,060 16,997 77 3,098 14 20,094 91 1935-39 26,960 20,087 74 3,248 12 23,335 87 1940-44 29,592 20,458 69 7,287 25 27,745 94 1945-49 36,663 ' 21.465 58 13,483 37 34,948 95 1950-54 54,700 20,567 38 19,888 36 40,455 74 ‘Adiusted supply, including a balancing item. | a l l 1 l l . l l -w0.__UkmU QQJOhQ Hm 320d“ TQtHQEQuQ>OU wcu MQXOJ Gm mmuhfi fidummwea 629:0 5m 552mm OMU MQUhOm umEoflouM w _ .. .mmu:o5=:m *0 mnofluofiw 30am wioriw d whnmwm 2mm: 28> 35 0mm: 32w: z F xh/ H :1 \ /\-- I Xawfr , . “$.11 . .2. Juunnam. .325 .2. . Ju-uufla 2:5 3E Ju-uo-E \ fun-E 25s c303» J-uuvi \\\\ ill-GI; .~I5-UQ3 \\\\\ , . 31¢ . 2.22m m+u< \ % ‘ IIIIIIIIIIII B...» .335... I .3 Uwt-RZQ 50a / E2; // B 2 > l/l l! I I /I I . aa£.o._m._.__a1¥<= u¢..~a._%@....o o =¢_ -=o~.>u.¢~@ S III oco :00 E Innuw I _~>u4 12.1 10-30;! w: \\ / \\ / .2... 5053 ..:._;_ Eu.¢a.m . , . :23; ¢|||f AllllV OCMMEOO 29.63025 . ,,::.:..s\ 0:358 Q2322. / \ J E-auuunam :8...» o~_un.u._c4 nuflum u: iv¢eo Qugueu .-__0 ;..o..E_.m3 05.01.»! \\ _.ou.._ nun... \\\ nu 2S \\ \\\\ \ I / \\k\\ $3 \ . uEouf of; i... _/ 2.13252. 23¢ m noon v3.2.7“. . All“ _ :.:..:...__ J 1/ a 5 9:255 oZmwEoo @9654 4/ / \ IIII . / III -u>_.a==__d 2222.15 II \ zoiuaeofu zuluunu; oeipuiou DKIQQEOO an»... Uu__fl >zozoom 3E m5. Z_ m%zwzofi<.m_m mo22 l0 pointed arrow indicates a simultaneous relation- ship. Theserelationships are considered separ- ately in the following discussion. rather than economic factors. Weather, in- sects, diseases, plant breeding, fertilizer and chemicals are the main determinants of yield. s Prices in preceding years serve as a basis for current price outlook and the cost-price relation- ship may determine the degree of seedbed prep- aration and expenditures used to increase yield. , This yield increase could, however, be intended to offset either a reduction in acreage imposed by government acreage restrictions, or to increase the overall production of rice on a given number of acres. The effect of prices on yield is caused primarily by variations in use of fertilizer, new eed varieties, machinery and better farming techniques. Acreage is determined by the supply of water resources, suitable land, capital, credit resources and acreage allotments. As indicated in Figure 8, the total quantity required for domestic use, exports and carryover must be equal to the supply at the beginning of the marketing year. Likewise the total supply in any 1 year must be equal to carryover, pro- duction and imports. The major relationships shown are presumed to be the most important physical and economic factors involved in the structural framework of ': the rice economy. Although 1950 was chosen arbitrarily, that year actually marked the begin- ning of a tremendous stride in acreage expansion, the use of fertilizers and chemicals and increased rice yields. Production increased 68 percent dur- ing 1950-54. Favorable prices encouraged great- er production until the supply exceeded the de- mand by about 1.5 million hundredweight of rough rice. Figure 8 indicates that domestic supply exerts considerable influence on domestic food uses and U. S. exports. The latter two factors and domes- tic price, however, are mutually affected. Total domestic supply and the foreign price exert di- rect effects on the domestic price. FARM PRICES AND GOVERNMENT PROGRAMS ‘Production decisions in the short run are governed largely by the prices anticipated for tqliéwcommodities produced. Under government price support programs, price uncertainty is largely removed. iConsequently, producers can devote more effort ‘to production decisions, capital outlays and improved production methods. l-Figure 9 shows the trend of on-farm prices received by rice producers" in the U. S. during 1930-54. Rice prices were relativelvfavorable during 1941-53, but since 1_953 large surpluses Yield is determined primarily by physical “"1 |I1 $ PER CWT. A A 5 v 11/ 4 - by formers; _ I \_/" - _ Price - .. \ recenved 1 lIll. llll llll llll Ill 0 I930 I935 I940 I945 I950 Figure 9. Rice, rough. annual average of farm prices. United States. 1933-54. have depressed free market prices and compli- cated the disposal of rice stocks through export market outlets. world prices. The major forces operating within the rice economy that affect domestic prices are produc- tion, domestic utilization, domestic exports, world prices and speculative demand. Rice prices in the U. S. during 1930-40 aver- aged only 35 percent of the average price received in the following 11 years, 1941-51, Table 7. Rice prices in 1941 increased 67 percent over the preceding year and continued to increase every year through 1947. Prices were still fa- vorable in 1948-49, even though they declined 18 and 31 percent, respectively, from the $5.97 per hundredweight received in 1947. The Ko- rean War dislocated rice production again in 1950, resulting in another considerable increase in foreign demand for United States rice. In TABLE 7. U.S. RICE. AVERAGE ANNUAL PRICE RECEIVED _ BY FARMERS, ROUGH BASIS. 1930-55 Year Weighted Year Weighted beginning average price beginning average price August per cwt. August per cwt. Dollars Dollars 1931 1.08 1944 3.93 1932 .93 1945 3.98 1933 1.73 1946 5.00 1934 1.76 1947 5.97 1935 1.60 1948 4.88 1936 1.85 1949 4.10‘ 1937 1.46 1950 5.09‘ 1938 1.42 1951 4.82‘ 1939 1.62 1952 5.87‘ 1940 1.80 1953 5.19‘ 1941 3.01 1954 4.57‘ 1942 3.61 1955 4.53 1943 3.96 The export market for rice has: been hampered primarily by large surpluses. in the’ United States, increased production in foreign countries, high domestic prices and lower ‘Includes an allowance for unredeemed loans. 11 response to the strengthening of foreign demand, rice prices by 1952 had reached the second high- est level since 1947. Surplus rice stocks increased considerably percentagewise during 1952-56, de- pressing domestic prices below support prices. The supply of rice exceeded domestic and foreign requirements in recent years and CCC acquisi- tions have reached high levels. Highlights oi Price Programs Immediately after World War I, attention was directed toward the spread between the prices farmers paid and the prices they received for farm commodities. This growing disparity be- tween farm and nonfarm commodity prices and declining farm incomes brought pressure from farm groups for legislation. An agriculture com- mittee was organized to determine a “fair ex- change value” for all farm products with that of nonfarm commodities. Despite continued efforts to establish some type of price legislation, it was not until 1929 that a bill aimed specifically at supporting farm prices became a law. The primary obJect of the Agricultural Act of 1929 was to promote an “orderly” marketing of farm products. Agricultural leaders believed that the prac- ticable way to raise farm prices was to cut pro- duction. This belief led to the passage of the Agricultural Adjustment Act of 1933, which was an endeavor to raise the purchasing power of farmers to parity level. However, the Act was declared unconstitutional by the Supreme Court in January 1936, and shortly thereafter Congress passed the Soil Conservation and Domestic Allot- ment Act. This Act aimed at diverting acreage out of surplus crops. Most of the principal provisions of the 1936 Act were rewritten into the basic Agricultural Adjustment Act (AAA) of 1938. This was the first Act that affected rice, but only to the extent of the conservation payment features. Although the AAA of 1938 established the pro- visions and framework for acreage allotments TABLE 8. ACREAGE ALLOTMENTS PROCLAIMED F OR RICE. U.S.. 1938-55 g Year Rice Year Rice 1.000 acres 1.000 GCIQS 1938 850‘ 1948 — 1939 862‘ 1949 — 1940 892' 1950 1.593 1941 896' 1951 1.868’ 1942 1.200‘ 1952 — 1943 1.380‘ 1953 — 1944 - 1954 — 1945 _- 1955 1.928 1946 -- 1947 — 1956 l 1.639 ‘Acreage allotments under the Agricultural Conservation Pro- gram. Where acreage allotments were in effect under both the Agricultural Conservation Program and the Agricultural Adjustment Act oi 1938. only AAA acreage allotments are shown. ’Acreage allotments terminated. 12 3 and marketing quotas rice was not conside v a basic commodity until 1941. The principal provisions of the AAA of remained in effect until December 31, 1948. T’ Act of 1938 extended the level of supports 1939; that is, the level of supports could be a‘ justed downward in 1950, whenever. normal plies were in excess of total supplies. There; was some dissatisfaction with the Act of 1938 caused by the fear that farm income might fallfi The 1949 Act again extended the date when flexible supports would go into effect. In establishing the Act of 1949, it was decided j, that relatively high-level supports were to remain if; in effect in 1950. Beginning in 1951, the flexible support provisions of the 1949 Act Went effect, but the level of support remained at 901 percent of parity through the 1954 rice crop. The 1949 Act set the support levels between 75 3 and 90 percent of parity, and also provided‘ that: marketing quotas be announced prior to January 1 for the ensuing crop year. The Act of 1954 provided that the level of ' price supports be between 82.5 and 90 percent of parity for the 1955 rice crop. Beginning with i the 1956 rice crop, the Act provided that they. level of support be between 75 and 90 percent i of parity, depending on the relation of normal supply to total supply. Bulletin 839, Legislation Affecting The Rice ‘_ Industry, 1933-56, gives detailed legislation. Acreage Allotments Acreage allotments for rice were proclaimed _I by the government for the first time in 1938, .i Table 8. These allotments were an effort to help , farmers recover from depressed domestic prices through soil conservation payments and at the : same time to decrease production to achieve . higher rice prices. During 1938-43 acreage allotments were for soil conservation payments only, and there were no acreage allotments during 1944-49. The acreage allotments in 1950-51 were on a voluntary acreage reduction basis. In December 1954, the Secretary of Agricul- ture declared acreage allotments and marketing quotas for the first time. An allotment of 1.4 million acres was approved by a referendum vote in February 1955. An acreage allotment for rice of 1.9 million acres was again declared in Decem- ber 1955 for the 1956 crop year. Influence of Yield on Gross Income Income variation to rice producers resulting from differences in yield is shown in Table 9. To illustrate the variation in gross income, acreage was held constant at 1.5 million. This represents the average acreage seeded to rice during 1935-54 with the 4 years of World "War II omitted. The constant acreage was considered normalsincelthe series include about an equal number of prewar and postwar years. The actual yield for each of the years considered during 1945-54 was multiplied by 1.5 million acres to obtain the corresponding production for those years. A price (considered normal) of $3.50 per hundredweight was obtained by taking 91 percent of the average parity price during 1935-54, with the 4 years of World War II omitted. p The elasticity of demand was assumed to be about —.2. The annually derived price based on the assumed elasticity and the percentage change in price from the average price of $3.50 w_as multiplied by the corresponding» annual pro- duction to obtain the gross income for rice. Each year’s income was expressed as a percentage of average income received during the 10 years. Rice prices and income vary as a result of changes in acreage, demand and yield. A re- duction in income could result from a shift in demand for other commodities, a large increase in production cost, a high yield on normal acreage, an average yield on an abnormally large acreage and a decline in foreign demand. Gross income varied from a high of 134 per- cent of the average income in 1945 to a low of 65 percent in 1954. The yield in 1954 was about 19 percent larger p than the yield in 1945, but gross income as a percent of the 10-year average fell 69 percent. Since rice is produced byirrigation, yields are much easier to control than are yields of crops that depend on rainfall and are subjected to other physical hazards. Irrigation also contributes to the control of noxious weeds and certain harmful insects. Under these considerations, initiating govern- ment programs designed to control rice pro- duction through acreage controls, while disregard- ing yield variations, could actually lower the TABLE l0. RICE. ROUGH, SUPPORT PRICES IN RELATION TO U.S. SEASON AVERAGE PRICES, 1941-55 Support Market Percent support Year prices prices price is of per cwt. per cwt. market price Dollars Dollars Percent 1941 2.04 3.01 67.77 1942 2.33 3.61 64.54 1943 ’ 3.96 1944 1 3.93 1945 2.82 3.98 70.85 1946 ’ 5.00 1947 3.76 5.97 62.98 1948 4.08 4.88 83.60 1949 3.96 4.10 96.58 1950 4.56 5.09 89.58 1951 5.00 4.82 103.73 1952 5.04 5.87 85.86 1953 4.84 5.19 93.25 1954 4.92 4.56 107.89 1955 4.66 4.53 102.87 ‘Not announced. producer’s income rather than increase it. If reducing acreage to lower production and con- sequently increase prices is the goal of price pro- grams, then an increase in total production be- cause of increased yields should not be permitted to offset reduced acreage. Support Price in Relation to Market Price Rice was added to the list of basic commidities in 1941, and a support price was announced in 1941 and again in 1942. There were no support prices announced for rice in 1943, 1944 and 1946, Table 10. The support price was below the season average price received by farmers in every year since 1941, except in 1951, 1954 and 1955. The support price relative to the market price during 1941-55 ranged from approximately 63 percent in 1947 to 108 percent in 1954. The situation improved slightly in 1955, but estimates of the 1956 carryover of rice stocks indicate continuing difficulties. During 1941-55, the support price averaged $4 per hundredweight while the market price averaged $4.64 per hundredweight. TABLE 9. HYPOTHETICAL DATA INDICATING THE GROSS INCOME RECEIVED FROM RICE USING ACTUAL YIELDS WITH A CONSTANT ACREAGE. ASSUMING AN ELASTICITY OF DEMAND OF —-.2. 1945-54 Yield per Production Deviation Percent change Price Gross Income as Year planted on 1.5 from Deviation in price per income to percent of acre‘ million acres mean from mean cwt. producers average Cwt. 1,000 cwt. 1.000 cwt. Percent Percent Dollars Million dollars Percent 1945 20.28 30,420 —29'28 —8.8 +44.0 5.04 153 134 1946 - 20.37 30.555 -—2793 —8.4 +42.0 4.97 152 133 1947 20.49 30.735 —2613 —7.8 +39.0 4.86 149 131 1948 20.96 ”. 31.440 — 1908 -—5.7 +28.5 4.50 141 124 1949 21.63 i- 32.440 -— 903 —2.7 +13.5 3.97 1'29 113 1950 23.71 35.565 +2217 +6.6 -33.0 2.34 83 73 1951 22.92 34.380 +1032 +3.1 —-15.5 2.96 102 89 1952 23.98 35.970 +2622 +7.9 a —39.5 2.12 76 67 1953 24.08 36.120 +2772 +8.3 ~41 .5 2.05 74 65 1954 23.90 35.850 +2502 +7.5 —37.5 2.119 78 69 Av. 33,348 3.50 113 ‘Actual yield. 13 Price Support Operations Since the government began price support operations for rice in 1941, rice prices have in- creased as a consequence of war needs, inflation and increasing domestic and foreign demand. Attractive rice prices and expanding market out- lets encouraged considerable expansion in rice acreage. Production increased every year during 1941-54, with the exception of 1945 and 1950, Table 11. The decline in production in 1945 was not a result of acreage reduction, but of a decrease of approximately 4O pounds per acre in yield. Actually the 1945 acreage was about 9,000 larger than that of 1944. The CCC did not possess any rice stocks until 1949, at which time it owned 11 thousand hundredweight. The CCC has owned rice stocks in every year since 1949. The quantity owned reached a low of 1 thousand hundredweight in 1953, and a high of 25 million hundredweight in 1955, even though the production of rice in 1955 was less than 10 thousand hundredweight more than the 1953 production. This indicates the im- portance of export markets in absorbing surplus rice stocks in the United States. Loans and purchase agreements were available for the first time in 1948. Approximately 4 million hundredweight were under purchase agreements and loans for the 1948 crop year. There were no purchase agreements in 1952. Loans and purchase agreements reached a high of 30 million hundredweight in 1954, but fell to less than half this amount in 1955. Table 11 shows that the quantity delivered to the CCC in 1949 was about 37 percent of the rice stocks under loans and purchase agreements. The amount delivered in 1953 was 67 perc and it increased to 83 percent in 1954. The reason for the high percentage of 10a and purchase agreements‘ being delivered tot p, CCC during 1951, 1954 and 1955 was the dif-igfi ferential between the market price and the sulfi-"lj. port price. The percentage of loans repaid isi much higher in each instance than tithe percentage.‘ c_ of purchase agreements. Loans are made .by producers who need funds for immediate use 9 whereas purchase agreements are more of a price insurance. ' = The support level was 85 percent of parity in 1941-42. Rice prices were supported at 90 per- cent of parity for the next 12 years and at 85 percent in 1955. However, in only 3 of the 15 years was the support price higher than the“ '1 season average price. Those were 1951, 1954 and 1955. Loan Activities During 12148-55, occ rice loans in the U. s. ” totaled about 207 million dollars, Table 12. About 90 percent of these loans were made in 1951, 1954 and 1955, the latter 2 years alone accounting for 80 percent of the total. Only 17 percent of the loans were repaid dur- ing 1948-55. All 1952 loans were repaid, but only 4 and 5 percent, respectively, of the 1954 and 1955 loans were repaid. Loans that are not repaid and charged off are cancelled by acquisition of the collateral. Other- wise, they are considered as outstanding loans. There were outstanding loans only in 1954 and 1955. Slightly over 13 percent of the loans were outstanding in 1954. This was the first year 0f TABLE 11. RICE, ROUGH, PRICE SUPPORT OPERATIONS AND PRICE ANALYSIS ITEMS, 1940-55 Year Owned by Under price Support Deliveries Level Support season beginning Production CCC in Loans purchase Total to of rate prigzfigggaed August August agreements CCC support per cwt. by fume", 1,000 cwt. 1,000 cwt. 1,000 cwt. 1,000 cwt. 1,000 cwt. 1,000 cwt. Percent Dollars Dollars 1940 24,495 1.80 1941 23,095 85 2.04 3.01 1942 29,082 ‘ 85 2.33 3.61 1943 29,264 90 2 3.96 1944 30,974 90 2 3.93 1945 30,718“ 90 2.82 3.98 , 1946 32,5353 90 2 5.00 ' 1947 35,253” 90 ' 3.76 5.97 1948 38,320“ 153 3,565 3,718 611 90 4.08 4.88 1949 40,7843 ll 1,865 6,282 8.147 3,043 90 3.96 4.10 1950 38,7573 459 217 575 792 26 90 4.56 5.09 1951 45,8533 369 4,008 1,843 5,851 518 90 5.00 4.82 1952 48,2603 226 209 209 ' 90 5.04 5.87 1953 52,761’ 1 1,821 2,665 4,486 3,100 ' 90 4.84 5.19 1954 64,5143 3,168 17,554 12,923 30,477 25,184‘ 90 4.88 4.56 1955‘ 53,6473 24.909 14,267“ 658“ 14,925“ 85 4.66 4.53‘ ‘Season average prices received by farmers weighted by sales. “Price support was mandatory at 90 percent ot parity but since prices were so tar above support levels, support rates were not announced. “Includes production in minor rice-producing states (Missouri, South Carolina, Arizona and Florida) which are not included in the estimates of production oi the Crop Reporting Board. ‘Preliminary. ‘Weighted by production. ‘Through January 15, 1956. 14 TABLE 12. LOAN ACTIVITIES. ROUGH RICE. U.S.. 1948-55 Value Quantity Crop Loans Loanzriepaid cantfelfller: by Loans Loans Loqnggepaid canfizlllrelfl by Loans year made charged o“ acgiilizitteipcrzilof outstanding made charged o“ acgiilizittiggof outstanding 1.000 dollars 1.000‘dollars 1.000 dollars 1.000 dollars 1.000 cwt. 1.000 cwt. 1.000 cwt. 1.000 cwt. 1948 658 635 23 153 147 6 1949 8.034 4.644 3.390 1.865 1.058 807 1950 1.1127 1.022 105 217 196 21 1951 20.914 18.424 . 2.490 4.007 3.563 444 1952 1.088 1.088 209 209 1953 8.888 3.324 5.564 1.808 717 1.091 1954 84.594 2.976 53.843 11.380 17.553 906 10.720 5.927 1955 82.404 3.813 76.982 15.557 696 14.521 340 real trouble for the rice industry and resulted in government action for acreage allotments and marketing quotas in 1955. The quantity side of the loan activity ledger reflects the quantity-value relationship which depends on the acreage loan rate during the particular crop year. The corresponding quantity is equal to the value of the loans divided by the average loan rate. Rice Prices in Relation to Prices Paid The two indices shown in Table 13 (1935-39 I 100) are compared during 1930-55. This period includes a decade of depression and re- covery, World War II, a postwar period of in- creasing prices, the Korean War followed by falling prices and diminishing foreign exports. These 26 years represent unfavorable and favor- able periods for the rice industry. There were 5 years in which the index of prices paid by farmers was higher than the index of rice prices. The ratio of the two indices declined at the beginning of the depression in 1930, from 90.1 percent (index of rice prices as a percent of the index of prices paid) to a low of 65.2 percent in 1932. The only other time that the relationship has been unfavorable to rice producers was in 1937-38. This was perhaps a result of the slight depression that occurred in 1937, but it had been regained by 1939. Rice production is highly technical and me- chanized; consequently, cash cost per acre is among the highest of any crop produced in the country. However, while rice production requires a much greater use of expensive machinery and water facilities, it requires fewer man-hours in planting and harvesting than some of the other major crops. The index of prices paid is not as relevant to the cost of producing rice as it is to many other farm commodities. The dependency of the parity concept for price programs on the index of prices paid (parity index) should be considered in analyzing the relationship of free market prices for rice and the parity index. It is believed that the analysis 0f the relative position of rice producers, based on the parity index, inevitably reflects a slightly better position than actually exists. However, the logical Way to ascertain the true position of the rice producer relative to the parity concept is to compile an index of prices paid for ‘Ifihose factors primarily embodied in rice produc- ion. Rice Prices in Relation to Parity Prices Rice prices as compared with parity prices were stable during 1910-14, Table 14. The sea- son average price per hundredweight received by farmers is expressed as a percent of the parity price per hundredweight for each year during 1910-55. The percent ranged from a low of about 39 percent in 1932 to a high of approximately 143 percent in 1919. ' i During 1920-25, prices rose relative to parity but fell sharply in 1926. With the exception of 1929, when the percentage improved slightly over the preceding year, prices declined every year during 1920-32. TABLE 13. INDEX OF RICE PRICES IN RELATION TO INDEX OF PRICES PAID. 1930-55 (1935-39 : 100) Rice prices as Year s alfedfifiiis P111212’... pggggggagfi 1830 108 121 80 1831 88 104 85 1932 58 88 i 85 1883 109 87 125 1834 Ill 96 116 1885 101 88 102 1836 118 88 117 1987 92 105 88 1938 88 89 90 1839 109 98 111 1840 113 88 114 1941 188 106 178 1942 Z27 121 188 1843 248 187 182 1844 Z47 145 170 1845 Z50 152 184 1946 314 156 188 1947 375 192 195 1948 387 288 148 1949 258 200 129 1950 320 204 157 1851 303 225 135 1952 388 228 181 1953 326 223 146 1954 Z87 224 128 1955 Z85 224 127 15 TABLE 14. SEASON AVERAGE PRICE OF RICE RECEIVED BY FARMERS IN RELATION TO PARITY PRICES, 1910-55 A . P .t . Price as Year verage pnce an y pnce percent per cwt. per cwt. of parity Dollars Dollars Percent 1910 1.47 1.85 79 1911 1.75 1.93 91 1912 1.98 1.93 102 1913 1.98 1.97 100 1914 1.98 , 1.97 100 1915 1.86 2.06 90 1916 2.19 2.41 91 1917 4.26 2.86 149 1918 3.99 3.34 119 1919 5.46 3.82 143 1920 2.48 3.90 64 1921 2.18 3.18 68 1922 2.19 3.16 69 1923 2.49 3.22 77 1924 2.99 3.22 93 1925 3.30 3.26 101 1926 2.51 3.24 77 1927 2.02 3.20 63 1928 2.03 3.24 63’ a ' 1929 2.22 3.22 69 1930 1.74 3.09 56 1931 1.08 2.72 40 1932 .93 2.39 39 1933 1.73 2.32 74 .1934 1.76 2.49 71 1935 1.60 2.51 64 1936 1.85 2.45 76 1937 1.46 2.57 57 1938 ' 1.42 2.43 58 1939 1.62 2.39 a 68 1940 1.80 2.41 75 1941 3.01 2.55 118 1942 3.61 2.90 124 1943 3.96 3.13 126 1944 3.93 3.28 120 1945 3.98 3.36 118 1946 5.00 3.72 134 1947 5.97 4.46 134 1948 4.80 4.83 99 1949 4.10 4.71 87 1950 5.09 4.86 105 1951 4.82 5.29 A 91 1952 5.87 5.40 ' 109 1953 5.19 5.36 97 1954 4.56 5-42 34 1955 4.53 5.48 83 In 1933, the average price relative to parity was almost twice that of 1982. This sharp 1n- crease was perhaps a result of the government programs initiated in 1933. The prices were relatively stable during 1933-40 and then rose sharply in 1941. Prices remained high and relatively stable during 1941- 47, but were comparatively unstable during 1948- 55. However, rice prices relative to parity were favorable during 1941-53. With theexception of 1924-25, prices relative to parity averaged about 25 percent below parity during 1920-40 and only 8 percent above parity for the remaining 15 years. These data indicate that on the average rice producers did not receive an equitable share of agricultural commodity incomes relative to parity 16 0890 prices during 1910-40 and 1948-55, but received prices well above parity during 1941-47. INFLUENCE OF GOVERNMENT PROGRAMS ON PRICES. Government price programs, which were initiated in 1941, seem to have had little influence in controlling the supply of rice/‘However, con- sidering the influence of government price pro- grams on prices implies some degree of price - stablization. The price-parity ratio might, in some degree, overstate the significance of free market rice prices compared with the level of parity prices, since the parity index used in this ratio is for all farm commodities and not for l rice only. The variation in rice prices from the average price during 1933-40 was compared with tneq variation in rice prices from the average price during '1948-55, each an 8-year period. T1118.’ analysis showed that the variation in rice prices was three times greater in the 8 years preceding- the war than during 1948-55. Domestic con- sumption was comparatively constant for the two periods, but the variation in exports for the, prewar period was about twice-as much as that” in 1948-55. This greater rice export variation during 1933-40 accounted for part of the greater "variation in rice prices in this period, while the _ residual effect causing greater stability in rifi " prices during 1948-55 was attributable to the influence of government price programs. Experience indicates that rice producers will not alter their production decisions materially in the short run regardless of the levels of market” prices for rice as determined by domestic and foreign demand. As long as a guaranteed support price enables rice producers to realize a return on their invest- * l‘: ment equal to, or above, the return on any other alternative use of their resources, they cannot be. expected to shift out of rice production. In view of limited profitable alternative uses l. j for most of their rice land, machinery and water resources, rice farmers will continue to use more fertilizer and improved production techniques to compensate for acreage reductions. ’ If the policy of continued high-level produc- tion is maintained without a corresponding strengthening in foreign demand and domestic utilization, a large number of rice producers will, in the long run, be forced out of production. ACKNOWLEDGMENT The present study was made under the Texas Agricultural Experiment Station’s state con- tributing project to the Southern Regional Price Policy Project SM-14, “Effects of Price Supports, Acreage Adjustments and Surplus Removal Upon Southern Agriculture.” '