United States 

Department 

of Agriculture 

www.ers.usda.gov 

 A Report from the Economic Research Service

Consolidation and Structural 

Change in the U.S. Rice Sector

Abstract

The U.S. rice farming industry experienced substantial structural changes from 1992-

2007, with the average farm size more than doubling by 2007 and the number of rice 

farms dropping by almost half. In addition, a substantial share of production shifted 

from the high-cost Gulf Coast region to the more competitive Arkansas Non-Delta 

and Mississippi River Delta growing areas. Farm consolidation and regional shifts are 

being shaped by cost and productivity considerations, barriers to entry for new farmers, 

and competitive average net returns, which support continued production by existing 

operators. High startup costs, rice-specific production management skills, and risk 

exposure are likely the key factors deterring entry. Rice farms are the most capitalintensive row crop farms in the United States and have the highest national average 

land rental rate of all major crops. At the same time, returns to rice production are 

highly variable due to fluctuating input costs and volatility in farm prices. Though rice 

farming requires large investments in land and capital, lack of other economic opportunities and competitive average net returns support continued production by existing 

operators. In this report, we investigate the factors driving these structural changes and 

explore the implications of those changes for market efficiency and competitiveness 

of the U.S. rice industry. Recent trends and economic incentives point to continued 

consolidation and area shifts. Overall rice area is expected to average about 3.3 million 

acres over the next decade, above the 2000-2009 average of 3.1 million acres.

Keywords: rice, production, yields, harvested area, cost of production, farm size, farm 

numbers, net returns, consolidation, structural change, startup costs, barriers to entry, 

ownership arrangements

Acknowledgments

The authors would like to acknowledge the support of Donna Roberts, Chief, Food 

and Specialty Crops Branch, and Richard Stillman, Chief, Animal Products and Cost 

of Production Branch, both of the Market and Trade Economics Division, Economic 

Research Service, USDA. Additionally, we would like to thank all of our reviewers for 

their comments and insights, including: Bobby Coats and Brad Watkins, both of the 

Katherine Baldwin, kbaldwin@ers.usda.gov

Erik Dohlman, edohlman@ers.usda.gov

Nathan Childs, nchilds@ers.usda.gov

Linda Foreman, lfarmer@ers.usda.gov

RCS-11d-01

April 2011

Contents

Approved by USDA’s 

World Agricultural 

Outlook Board

Introduction.............................. 3

Rice Farms Expand in Scale 

as Number of Farms 

Dwindles.............................. 5

Growth in Farm Size 

Partially Driven by 

Advantages of Scale............ 7

Differences in Cost 

Structures Spur Regional

Production Shifts ............... 10

Economic Factors Limit Rice 

Farm Entries and Shape 

Industry Structure.............. 15

Economic Returns to Rice

Production Remain 

Comparatively High ........... 20

USDA 10-Year Baseline 

Projections Indicate Continued 

Farm Consolidation ........... 23 

Conclusions........................... 27

References ............................ 28
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University of Arkansas; Steve Martin, Mississippi State University; Michael 

Salassi, Louisiana State University; Mark Simone, Farm Service Agency, 

USDA; and Andrew Aaronson, Rice Interagency Commodity Estimate 

Committee Chairman, Office of the Chief Economist, USDA. Thanks to the 

participants of the 2010 Rice Technical Working Group meetings in Biloxi, 

Mississippi, who provided guidance and suggestions on the preliminary 

research that became the foundation for this report, and to Priscilla Smith and 

Susan DeGeorge for editorial and design assistance.
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The past decade has been characterized by significant changes to the 

structure of the U.S. rice-farming industry. With demand from domestic 

consumers and export markets higher than previous years, U.S. rice 

production has risen. However, the number of rice farms has declined 

while the average size of the remaining rice farms has expanded substantially, according to the U.S. Census of Agriculture (see box, “Data 

Sources”). Between 1992 and 2007, the number of U.S. rice farms fell 

from 11,212 to 6,084, and average rice acreage per farm grew from 278 

acres to 453 acres. The largest rice farms account for a growing share of 

rice production, with those larger than 1,000 acres of rice producing 36 

percent of the U.S. crop in 2007, compared with 14 percent in 1992. The 

location of rice farms has also shifted. While the number of rice farms 

decreased in all major rice-producing States between 1992 and 2007, 

Arkansas and Missouri raised their share of rice production, largely 

because of lower production costs due to economies of scale, management 

expertise, infrastructure, and increased productivity. Meanwhile, California 

rice producers have been able to direct much of their production toward 

World Trade Organization (WTO) market access commitments since 1995. 

By contrast, price, climatic factors, and higher production costs combined 

to cause lost market share in other areas, with a particularly pronounced 

drop in farm numbers in Texas and the historic coastal region of Louisiana.

These changes raise three key questions: 

•	What factors drove these structural changes?

•	What are the implications of these changes for market efficiency and 

for the competitiveness of the U.S. rice industry?

•	Will these changes continue, and if so, what will the U.S. rice farming 

sector look like in a decade?

In this report, we evaluate the nature and causes of structural change in 

the U.S. rice-farming sector, highlighting the changing number, scale, 

We used data primarily from the U.S. Census of Agriculture (1992, 1997, 2002, and 2007). To track major trends in 

U.S. agriculture, USDA’s National Agricultural Statistics Service (NASS) conducts a Census of Agriculture twice a 

decade. The census includes information on farm and producer characteristics, types of planted crops, acreage, yields, 

production, total assets, farm receipts, and producer demographics. Data are released on a State-by-State and national 

basis. By comparing the recently released 2007 Census of Agriculture with earlier ones, recent developments in the U.S. 

rice-farming industry can be analyzed. 

Combining agricultural census data with detailed cost and returns information from the USDA rice Agricultural 

Resource Management Survey (ARMS) of 2000 and 2006 provides a more comprehensive and longer-term perspective 

on developments within the sector. ARMS is conducted for rice farms every 5 to 6 years, and is undertaken jointly by 

NASS and the Economic Research Service (ERS). The USDA 10-year baseline projections are the USDA consensus 

view of anticipated future market developments, given the policy and economic assumptions at the time of its publication 

(USDA, 2011).

Data Sources

Introduction
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and location of rice farms. The role of economic factors that deter entry 

into rice farming and other factors that support the ongoing operation of 

existing farms are emphasized. Past developments provide context for the 

USDA 10-year agricultural baseline projections, which identify the primary 

economic and policy factors likely to guide future industry trends (USDA, 

2011).
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Two of the most notable trends identified by the 2007 and earlier agricultural censuses are the ongoing decline in the number of rice farms and the 

steady rise in the average number of acres of rice on the remaining farms. 

Both trends are not unique to rice production (table 1).1 The 6,084 U.S. rice 

farms reported in 2007 represent a 46-percent decline in farms since 1992. 

Over the same period, the average rice acreage per farm rose 63 percent.2

Rice farms in 2007 had the second-highest average acreage of all farms that 

produced major field crops. Cotton farms had the largest average acreage 

(564 acres), followed by rice (453 acres), wheat (317 acres), corn (248 acres), 

and soybeans (229 acres).3

The distribution of farm size share has also changed markedly over the last 

three agricultural censuses, with larger farms now accounting for a greater 

share of the total number of rice farms than in previous years (table 2). Farms 

with 1,000 or more acres of rice accounted for a larger percentage of all rice 

farms in 2007 (10 percent) than in previous agricultural censuses.

Table 1

U.S. rice farm statistics

1992 1997 2002 2007

Number of farms

 

11,212 

 

9,627 

 

8,046 

 

6,084 

Individual, family, or familyheld corporation farms  

8,291 

 

6,525 

 

5,749 

 

3,848 

Average all-farm rice acreage 278 328 397

 

453 

Total rice acreage

 

3,117,718 

 

3,161,576 

 

3,197,641 

 

2,758,792 

Note: While “number of farms” and “total rice acreage” are updated in the Census of Agriculture 

subsequent to the original data release, farm classifications as individual or family farms are 

not. In the interest of including the most recent data available, we have included updated farm 

numbers and acreage in this table. However, farm classification data come from the original 

data release. 

Source: USDA, NASS, Census of Agriculture, 1992, 1997, 2002, 2007.

Table 2

Distribution of rice farms by size

1992 1997 2002 2007

Harvested

acres of rice Farms Rice acres Farms Rice acres Farms Rice acres Farms Rice acres

1-99 2,620 134,587 1,937 98,867 1,502 75,963 1,047 55,674

100-249 3,772 634,961 3,001 511,085 2,214 371,716 1,459 246,020

250-499 3,296 1,130,817 2,837 991,624 2,199 775,819 1,616 569,073

500-999 1,232 804,740 1,437 936,483 1,504 1,001,665 1,346 892,471

1,000+ 292 412,613 415 623,517 627 972,478 616 995,554

Total 11,212 3,117,718 9,627 3,161,576 8,046 3,197,641 6,084 2,758,792

Note: For Table 2 and all of the following tables and figures, data for 1992 comes from the 1997 Census.

Source: USDA, NASS, Census of Agriculture, 1997, 2002, 2007.

Rice Farms Expand in Scale as 

Number of Farms Dwindles 1In fact, the same holds true for corn, 

cotton, soybean, and wheat farms. 

Between 1992 and 2007, the number 

of farms growing each of these field 

crops declined by at least 25 percent, 

while the average acreage per farm of 

the specified commodity increased at 

least 50 percent.

2While the number of rice farms and 

rice acreage declined between the 

1997 and 2007 agricultural censuses, 

rice production was higher in 2007 

because yield growth more than offset 

the decline in acreage. Between the 

2002 and 2007 censuses, declining 

farm numbers more than offset the 

impacts of larger farm size and higher 

yields, resulting in a 6-percent decline 

in production—from 210 million hundredweight (100 pounds (cwt)) to 199 

million cwt. Both area and production have increased since 2007, with 

3.615 million acres harvested in 2010, 

producing a record 243.10 million 

cwt. Data on the number of farms will 

not be known until the next Census of 

Agriculture is taken in 2012.

3These figures refer to average acres 

planted to the specific commodity 

mentioned. Overall farm size is typically much larger, as many operations 

plant numerous crops or hold acreage 

fallow.
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Production from larger farms continues to account for an increasing share 

of total production as shown by changes in the production distribution by 

farm size over time (fig. 1). In the latest Census of Agriculture, farms with 

over 1,000 acres of rice produced 36 percent of the overall crop, overtaking 

other farm sizes in production share. Similarly, as rice farms have consolidated into fewer, but larger entities, a greater proportion of these operations 

have become very high-grossing enterprises (fig. 2).4 However, along with 

increased size and specialization comes increased risk exposure. This topic 

will be revisited later in the report. 

0

10

20

30

40

50

60

70

80

1-99 100-249 250-499 500-999 1,000+

Figure 1

An increasing share of U.S. rice is grown on larger rice enterprises

Cwt = hundredweight (100 pounds).

Source: USDA, NASS, Census of Agriculture, 1997, 2002, 2007.

Production (million cwt)

Acres planted to rice

1992

1997

2002

2007

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Up to $24,999 $25,000 to

$49,999

$50,000 to

$99,999

$100,000 to

$249,000

$250,000 to

$499,999

$500,000 to

$999,999

$1 million

or more

Figure 2

More than two-thirds of U.S. rice farms have a sales value of more than $250,000

Number of farms

Value of sales

Source: USDA, NASS, Census of Agriculture, 1997, 2002, 2007.

1992

1997

2002

2007

4Gross farm sales are calculated as a 

market value of agricultural products sold in addition to Government 

payments. For the three agricultural 

censuses preceding 2007, the largest 

share of producers earned $100,000-

$250,000, with roughly equal numbers 

earning more or less than that amount. 

However, the latest Census of Agriculture showed that two-thirds of U.S. 

rice farms reported total sales of more 

than $250,000, and nearly 43 percent 

of rice farms had gross sales of over 

$500,000. This is up from 16.4 percent 

in 2002, almost 20 percent in 1997, 

and just 10.1 percent in 1992. 
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The forces driving a decline in farm numbers and an increase in average farm 

size are primarily financial pressures and economic incentives. These factors 

are pushing rice producers to reduce per-unit costs by making more efficient use of resources through greater specialization or by creating enhanced 

economies of scale (efficiencies from increased size). Previous research 

found that farm size, changes in production technologies, and specialization 

were largely responsible for boosting productivity and lowering unit costs in 

the poultry, swine, dairy, and the livestock sector as a whole (MacDonald, 

2008; Key and McBride, 2007; MacDonald et al., 2007; and MacDonald 

and McBride, 2009). For example, MacDonald et al. (2007) found that the 

smallest dairy herd sizes in 2005 had output per cow that was 25 percent 

lower than the largest herd-size category, and per-unit total costs that were 

121 percent higher. 

The link between farm size and reduced unit costs is not as strong in the 

crop sector as it is in livestock, with previous studies based on Agricultural Resource Management Survey (ARMS) data showing mixed results. 

Foreman (2006) found that total (operating, ownership, and economic) costs 

per acre were virtually identical for corn farms of varying size, but noted 

that higher yields provided greater returns per unit for larger farms than for 

smaller ones. Similarly, Brooks (2001) reported that the largest two among 

five size categories of cotton farms had similar, or even slightly higher, costs 

per acre than the smaller classes, but higher yields again produced greater 

per-unit returns to the larger farms. In contrast, the largest wheat and soybean 

farms had lower average yields than smaller farms producing the same 

commodity. However, only wheat farms showed a consistent decline in peracre costs as farm size increased, which enhanced net returns for the larger 

farms. Soybean farms in the mid-sized ranges (250-499 acres and 500-749 

acres) had, by small margins, lower costs and higher yields than the smallest 

and largest farms (Ali, 2002; Foreman and Livezey, 2002).

For rice, yield differences apparently played little role in promoting increased 

farm size. Average rice yields in 2000-09 were 17 percent higher than the 

previous decade. However, agricultural census data indicate that rice yields 

vary little by farm size, and that the gap between the yields from large farms 

and small farms has narrowed in recent years. In the 2007 census, farms 

exceeding 1,000 acres of rice achieved yields less than 1 percent higher than 

the average, while farms with less than 100 acres achieved yields 5 percent 

below average. In 2002, the smallest farms had yields 8 percent below the 

average, while yields among the largest farms were 1 percent higher than 

average. Farms in the intermediate-sized categories reported yields ranging 

from 2 percent less to 1 percent greater than the average.5

Previous research on farm consolidation suggested that the phenomenon was 

motivated by economies of scale based primarily on per-unit cost advantages, but this now seems to be less of a factor. At the beginning of the 1990s, 

Salassi (1992) found that, while per-acre variable cash expenses were similar 

among rice farms of different size classes, per-acre fixed cash expenses—

such as farm overhead, taxes, and interest expenses—declined as farm sizes 

Growth in Farm Size Partially Driven by 

Advantages of Scale

5Farms with 250-499 acres had yields 

slightly higher than those with 500-999 

acres, perhaps indicating some regional 

or varietal (long vs. short/medium 

grain) distinctions (e.g. with the former 

category clustered in regions with more 

favorable soil and climatic conditions).
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increased. In the past, rice farms that grew in size—regardless of location or 

other characteristics—could become more competitive by spreading fixed 

costs over a larger area. 

The relationship between rice farm size and lower unit costs is somewhat 

supported by the most recent ARMS evaluation of rice farm costs and returns 

(Livezey and Foreman, 2004).6 Livezey and Foreman (2004) reported wide 

variations in per-unit average costs between farms, although the differences 

in average unit costs by farm size were not statistically significant (table 3).7

Farms with less than 250 acres of rice had per-unit operating and ownership 

costs of $6.41 per hundredweight, or 100 pounds (cwt). These costs fell to 

$5.86/cwt among farms with 750 or more acres. On a per-acre basis, there 

was little difference in ownership costs (capital recovery of machinery and 

equipment, taxes and insurance) by farm size. However, operating costs were 

much higher for farms with fewer than 250 rice acres ($364 per acre) than 

for farms of 250-499 acres ($312 per acre), 500-749 acres ($284 per acre), 

and 750 or more acres ($298 per acre). The main reason for the higher operating costs for smaller farms were the custom operations associated with 

harvesting and drying. The smallest farms spent almost $113 per acre on all 

custom operations, compared to $48 to $74 per acre for the other farm size 

classes. 

Rather than a straightforward relationship between farm size and per-unit 

output costs, ARMS data—supported by data and trends from successive 

agricultural censuses—shows that regional variations in production practices 

and costs, farm and farm-operator characteristics, and growing conditions 

are all key factors influencing the structure and location of rice farms in the 

United States.

6Livezey and Foreman (2004) use data 

from the 2000 ARMS on rice production costs. A more recent survey was 

conducted in 2006, but due to time 

limitations, the data have not been 

vetted and tailored for the types of 

comparisons made with the data from 

the previous survey. 

7Average costs ranged from $3.99/

cwt for the one-quarter of farms with 

the lowest costs to $8.94/cwt for the 

quarter with the highest costs.
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Table 3

Rice farm costs and returns, 2000

 Item Fewer than 250 acres 250-499 acres 500-749 acres 750 or more acres

Number of farms 3,070CD 2,339C *913AB a742A

Rice acreage

 Percent of rice acres *15.5 *31.4 19.6 #33.4

Percent of rice production (cwt) *16.3 *31.7 19.0 a33.0

Yield in cwt per acre

 Expected 74.2 71.1 69.5 70.3

 Actual 70.8 68.2 65.4 66.7

Operating & ownership costs/cwt

 Expected 6.12 5.76 5.54 *5.56

 Actual 6.41 6.00 5.88 *5.86

Per acre costs of rice production

Gross value of production (in $/acre) 380.57 372.33 360.14 364.60

Operating costs (in $/acre) 363.66 312.33 283.92 #298.49

 Seed 24.89 23.05 21.97 23.61

 Fertilizer 51.16 44.30 #43.01 *48.91

 Soil conditioners *0.01D *0.03CD *0.01B a0.00AB

 Manure 0.00 0.00 0.00 0.00

 Chemicals 55.59 50.54 43.88 48.24

 Custom operations–drying 30.05C 24.94 19.11A DI

 Custom operations–harvesting 19.06BCD *5.53AD #2.53A DI

 Custom operations–other1 63.67 43.53 39.30 35.43

 Fuel, lube, and electricity–irrigation *33.59 44.06 *40.21 *44.71

 Fuel, lube, and electricity–other1 13.91 14.49 14.96 18.83

 Repairs 18.18 19.43 20.53 *18.55

 Purchased irrigation water *18.58 10.10 a6.93 a11.08

 Interest on operating capital 9.30B 7.89A 7.09 *7.38

 Hired labor *25.68 24.44 *24.39 a29.41

Ownership costs (in $/acre) 90.13 96.90 100.60 92.52

 Capital recovery of machinery 

 and equipment 74.13C 79.04 86.49A *78.09

 Taxes and insurance 16.00 17.86D 14.11 14.43B

Operating costs (in $/acre) 363.66 312.33 283.92 #298.49

Operating and ownership costs 453.79 409.22 384.52 *391.00

Total costs 658.61 604.96 546.79 *536.19

Value of production in $/acre less

 Operating costs a16.91 60.01 #76.22 a66.12

 Operating and ownership costs *-73.22 *-36.89 a-24.39 a-26.40

 Total costs -278.04 -232.63 *-186.66 a-171.59

1Statistical signficance not evaluated for these categories. 

Cwt = hundredweight.

Coefficient of variation = (standard error/estimate)*100. * indicates that CV is greater than 25 and less than or equal to 50. # indicates that CV is 

greater than 50 and less than or equal to 75. a indicates that CV is above 75.

Letters A, B, C, and D indicate significant column difference tests based on pairwise two-tailed [Ho:B1=B2] delete-a-group Jackknife t-statistics 

at a 90-percent confidence level or higher. A=column 1, B=column 2, etc.

DI = Data insufficient for disclosure. 

Source: USDA, NASS and ERS, 2000 Agricultural Resource Management Survey. (Based on 607 observations that are weighted to represent 

the planted rice acres in the surveyed States. Coverage includes 5 States: Arkansas, California, Louisiana, Mississippi, and Texas.)
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Reduced unit costs associated with farm size may have motivated some of 

the overall farm consolidation, but a significant and closely related factor is 

the shift of production to lower-cost production areas, particularly within the 

Southern rice-growing region, which consists of the Arkansas Non-Delta, the 

Mississippi River Delta, and the Gulf Coast production region. The industry 

in California, the fourth rice-growing region, supplies a much different highquality medium-grain market and is discussed later (see box, “U.S. Rice 

Industry Overview”).

Though States in all regions have lost farms over the past few decades, total 

acreage is a more appropriate measure of geographical industry shifts than 

farm numbers, especially in light of the farm consolidation issue discussed 

above. Changes in total acreage have been especially pronounced in the Gulf 

Coast States of Louisiana and Texas, with the region losing almost 50 percent 

of its rice area between 1992 and 2007 (table 4). Acreage within the Arkansas 

Non-Delta and the Mississippi River Delta regions declined 5 percent, well 

within the normal year-to-year range of planted acreage variation. 

More Farm Exits for High-Cost Gulf Coast Region

The geographical shifts in production are closely related to regional differences in production costs (table 5). In the South, for example, production 

costs in the Gulf Coast were 15-16 percent greater than in the other two 

regions (Arkansas Non-Delta and Mississippi River Delta) in 2009, with 

operating costs being the main distinguishing factor.8 One of the biggest 

differences in operating costs comes from Gulf Coast producers’ planting 

method. Along the Gulf Coast, rice is typically aerial-seeded to control red 

rice (a persistent weed common in cultivated rice fields in the South that 

reduces crop yield and quality). This seeding method requires more seeds per 

acre and also results in higher costs for custom operations. Additional chemDifferences in Cost Structures Spur 

Regional Production Shifts

Table 4

Rice planted area comparisons: 1992-20071

1992 1997 2002 2007 1992-2007

------------------------Planted acres------------------------

Percent 

change

Louisiana 630 585 540 380 -40 

Texas 353 260 206 146 -59 

 Gulf Coast 983 845 746 526 -46 

Arkansas 1,400 1,400 1,516 1,331 -5 

Mississippi 280 240 255 190 -32 

Missouri 117 122 190 180 54 

 Other South 1,797 1,762 1,961 1,701 -5 

California 396 518 533 534 35 

United States 3,176 3,125 3,240 2,761 -13 

1Area losses in Louisiana in 2007 may be exaggerated due to lingering salt water intrusion 

effects from Hurricane Katrina in 2005. However, the long-term trend of area loss in Louisiana is well-established. 

Source: USDA, NASS, Quickstats, 2010. 

8ARMS data from 2000 found that 60 

percent of the country’s low-cost farms 

were in the Arkansas Non-Delta region, while 14 percent were located in 

the Mississippi River Delta. Conversely, 37 percent of the Nation’s high-cost 

farms were located on the Gulf Coast, 

with just 15 percent in the Mississippi 

River Delta. Salassi (1998) found that 

the three regions had identical dollarsper-acre production cost rankings. 

Low-cost rice farms were defined as 

the quartile of total U.S. rice farms 

with the lowest costs, while high-cost 

farms were defined as the quartile with 

the highest costs.
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Rice production is limited to certain areas within the United States, based on the physiological needs of the rice plant. 

Abundant irrigation water, whether from surface-water sources like rivers, bayous, or canals, or pumped from groundwater 

aquifers, is required. All U.S. rice acreage is irrigated. Soil type is also important, as rice can only be economically grown in 

soils that are able to retain water or hold a shallow flood. Rice fields need to be reasonably level in order to maintain uniform 

water depth, and, increasingly, rice fields are leveled with precision laser technology for this reason. Lastly, rice requires 

warm temperatures during critical growing stages, as cool temperatures cause plant sterility. Currently, the U.S. production 

areas in Arkansas, California, Louisiana, Mississippi, Missouri, and Texas provide the best balance of climate and topography. 

U.S. rice production is divided into four regions based on soil classifications and other characteristics (see map). The 

Arkansas Non-Delta, comprised of most counties in Northeastern Arkansas, as well as the Bootheel of Missouri and the 

Arkansas Grand Prairie. The Mississippi River Delta region includes counties in Southeastern Arkansas (primarily adjacent 

to the Mississippi River), as well as all production in Mississippi and Northeast Louisiana. The Gulf Coast production region 

is split between Southern Louisiana and counties on the Coastal Plain of South Texas. These three production areas in the 

South account for about 80 percent of U.S. rice acreage and production, with the fourth region, California, accounting for the 

balance. 

California grows almost exclusively high-quality medium- and short-grain rice varieties, both for the domestic and export 

markets. The Southern production areas grow nearly all of the long-grain rice produced in the U.S. The South also produces 

a varying share of medium- and short-grain rice, depending upon market conditions, with Southern medium-grain primarily 

used in processed products such as cereal.1

The U.S. is a net rice exporter, annually exporting approximately 45 percent of production, and typically ranks as the fourthor fifth-largest exporter. A large share of U.S. rice exports (typically between 30 and 40 percent) consists of rough (unmilled 

or paddy) rice. The United States is the primary global source of rough rice. All other major exporters ship milled rice to 

protect their domestic milling industries. Mexico, Central America, Canada, the European Union, Haiti, Japan, and Saudi 

Arabia are a few of the larger export destinations of U.S. rice. Imports currently account for around 15 percent of domestic 

use, and their market share increased sharply from the early 1980s through 2007/08.2 Imports expanded largely because of a 

growing immigrant population and a certain amount of diversification in the tastes and preferences of American consumers. 

The United States typically imports high-quality aromatic rice from Asia, such as Thai Jasmine and Basmati varieties from 

India or Pakistan. These specific Asian varieties are not currently grown in this country.

1Given that there are only a handful of exporters of medium- and short-grain rice—Australia, China, and Egypt aside from the United 

States—California plays a prominent role in the global medium/short-grain market. 2Does not include seed use.

U.S. Rice Industry Overview 

U.S. rice production regions

Arkansas Non-Delta

California

Gulf Coast

Mississippi River Delta

Counties growing rice not 

included in ARMS dataset1

1

Although these counties were not included in the ARMS dataset, NASS reported these counties grew rice in at least 1 year from 2007 to 2009. 

Source: Regions as defined by USDA, ERS internal Cost of Production calculations. Additional counties are from USDA, NASS Quickstats, 2010.

ARMS=Agricultural Resource Management Survey, conducted 

jointly by USDA’s Economic Research Service (ERS) and 

National Agricultural Statistics Service (NASS).

Note: Highlighted counties did not necessarily grow rice each year.
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ical inputs are also required to control for water weevils, and preplanting 

seed treatments may be necessary, further raising chemical costs. A greater 

percentage of producers in this region also purchase irrigation water, further 

increasing those costs. Finally, the region has the highest pumping costs in 

the country, largely because of the need to sink deep wells in order to find 

fresh water.

In addition to operating costs, overhead costs for the Gulf Coast region are 

also higher, particularly because of the opportunity cost of land. High landrental rates reflect land-use competition in urbanizing parts of the Greater 

Houston area.9 Growers in the Gulf Coast region are also subject to wider 

variation in income due to the practice of harvesting a ratoon crop (a partial 

second crop grown from the stubble of the main-crop harvest). Growers 

must get their fields planted early to successfully grow a ratoon crop. Good 

Table 5

Rice production costs, 2008-091

United States Ark Non-Delta California MS River Delta Gulf Coast

Item 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009

Dollars per planted acre

Operating costs:

 Seed 45.09 65.48 42.19 61.20 50.81 73.72 48.29 70.05 43.05 62.45

 Fertilizer2 110.80 108.59 94.09 92.40 125.92 123.66 107.39 105.46 136.01 133.55

 Chemicals 68.68 76.92 60.25 67.39 96.48 107.91 59.56 66.61 71.53 80.01

 Custom operations 44.91 49.03 29.34 31.95 86.13 93.80 35.76 38.95 51.18 55.74

 Fuel, lube, and electricity 138.96 91.80 147.76 97.94 91.71 60.79 139.95 92.75 160.01 106.05

 Repairs 27.96 28.50 29.38 29.95 27.03 27.56 26.49 27.00 27.25 27.78

 Purchased irrigation water 11.32 12.42 0.19 0.21 45.17 49.19 0.00 0.00 16.78 18.28

 Commercial drying 27.60 19.03 18.33 12.33 50.66 34.79 14.80 9.81 39.89 28.88

 Interest on operating capital 3.31 0.63 2.98 0.55 3.87 0.78 3.09 0.58 3.74 0.70

 Total, operating costs 478.63 452.40 424.51 393.92 577.78 572.20 435.33 411.21 549.44 513.44

Allocated overhead:

 Hired labor 19.52 20.08 20.99 21.44 25.38 25.94 21.16 21.62 9.82 10.04

 Opportunity cost of 

 unpaid labor 44.40 45.42 37.80 38.62 69.75 71.28 30.97 31.65 49.82 50.91

 Capital recovery of 

 machinery and equipment 110.87 118.33 113.17 120.75 116.24 124.02 103.06 109.97 109.24 116.56

 Opportunity cost of

 land (rental rate) 139.71 159.66 106.17 120.72 278.00 316.10 100.26 114.00 130.52 148.41

 Taxes and insurance 19.26 21.66 19.84 22.27 16.66 18.70 24.09 27.04 15.47 17.37

 General farm overhead 25.28 25.86 20.32 20.71 36.60 37.31 28.56 29.12 22.71 23.15

 Total, allocated overhead 359.04 391.01 318.29 344.51 542.63 593.35 308.10 333.40 337.58 366.44

 Total costs listed 837.67 843.41 742.80 738.43 1,120.41 1,165.55 743.43 744.61 887.02 879.88

1Developed from USDA, NASS and ERS, Agricultural Resource Management Survey, base year, 2006.

2Commercial fertilizers and soil conditioners.

Ark Non-Delta = Arkansas Non-Delta, most counties in Northeastern Arkansas; MS River Delta = counties in Southeastern Arkansas (primarily 

adjacent to the Mississippi River), as well as all production in Mississippi and Northeast Louisiana.

Source: USDA, ERS, Cost of Production Dataset, 2010. The cost of production estimates are developed using base year 2006 ARMS data. 

The base year estimates are updated to the current year through the use of price indices, acreages, yields, and other factors.

9As discussed later, these high land 

costs may limit the ability of young 

farmers to acquire land from retiring 

generations of producers.
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growing season weather and a dry harvest are also required. This increases 

risk and production variability for producers in the region.

Rice production methods in the Arkansas Non-Delta and the Mississippi 

River Delta are similar, a finding reinforced by a comparison of regional 

production costs. For example, most producers in both regions do not have 

to purchase irrigation water, but declining aquifers in some production 

areas may force a shift to purchased irrigation surface water in future years. 

Though total costs between the two regions differ by less than one percent, 

some differences are apparent within certain categories. Both regions utilize 

drill-seeding for planting, but seed and fertilizer costs were higher in the 

Mississippi River Delta region. Additionally, fuel costs are lower for the 

Mississippi River Delta region, likely because producers there either use 

surface water or are accessing a much shallower water table.10 Lastly, more 

producers in the Mississippi River Delta region have onfarm drying facilities, 

lowering total average commercial drying costs.

Relatively lower operating costs per acre in the Arkansas Non-Delta and the 

Mississippi River Delta regions may also help explain differences in farm 

sizes between the Southern regions. In the 2006 ARMS, harvested rice acres 

per farm were highest in the Mississippi River Delta, which is the region with 

the lowest land-rental rate. Farms in the Arkansas Non-Delta averaged around 

10 percent less rice acreage than farms in the Mississippi River Delta. Gulf 

Coast farms, with a land-rental rate 30 percent higher than in the Mississippi 

River Delta, had the smallest average farm size in the Southern region. 

Farm Policy Reinforces Shift of Rice Farming 

Away From Gulf Coast

Changes in the farm payment structure introduced in the 1996 Freedom 

to Farm Act also likely played a role in the reduction of farms in the Gulf 

Coast region by decoupling payments from current production levels and 

prices through the issuance of direct payments (previously called production flexibility contract payments, or PFCs).11 Specifically, the 1996 Farm 

Act provided direct PFC payments to eligible contract holders (landowners). 

Landowners with PFC contracts could even idle their land, provided it 

was environmentally maintained, which typically required little additional 

expense. As a result of these program changes, in years of low prices many 

contract holders, especially in high-cost producing areas, found it more profitable to idle their rice land. 

Within the Gulf Coast region, Texas was especially vulnerable to area 

contraction because of the State’s high production costs, lack of alternative crops, and high levels of tenant farming. From 1992 to 2007, Texas rice 

acreage declined 59 percent, with much of this land being idled. In some 

cases, the landowners did not sell the land on which rice had previously been 

grown because of their eligibility for direct payment income.12

Differentiated Market Distinguishes 

Californian Rice Production

California’s rice production and cost situation is vastly different from the 

South. In 2009, California rice producers had the highest operating costs 

10New Mississippi State regulations 

governing all irrigation and aquaculture wells drawing on the Mississippi 

River Alluvial Aquifer came into effect 

on January 1, 2011, requiring that all 

wells be metered and users must have 

certain conservation practices in place.

11The payments are now the product of 

(1) the annual payment rate, (2) the 

farm’s historic program acreage reduced 

by 16.7 percent for flexibility, and (3) 

the farm’s fixed program yield. These 

payments were essentially fixed each 

year for eligible contract holders, 

and had virtually no direct impact on 

production decisions. Indirectly, the 

payments often raised the rental price or 

value of the land, increased the wealth 

of the landowner, reduced risk, and 

provided capital for operations and debt 

financing. The PFC payments were continued in the 2002 and 2008 Farm Acts 

and are referred to as direct payments. 

Additional payments, called market loss 

assistance (MLA) payments, were added 

by Congress for crop years 1998-2001 

due to low market prices. Similar to the 

PFC payments, contract holders did not 

have to grow rice or any other program 

crop to receive them. The 2002 Farm 

Act replaced the MLA payments with 

counter-cyclical payments (CCP), which 

are decoupled from current production 

levels, but not from current prices. 

12Payment limitation adjustments and 

income eligibility caps were included in 

the 2008 Farm Act, but it is too soon to 

evaluate their impacts on the structure 

of U.S. rice farming.
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in all but three of the categories shown in table 5, with total operating costs 

11 percent higher than the Gulf Coast, the second highest-cost production region. High costs for seed, custom operations, and chemical use were 

a result of aerial seeding in this region. Californian producers also paid 

substantially more for irrigation water than producers in other regions—

nearly four times as much as the average U.S. rice farm. When ownership 

costs are included, production costs per acre for California are 25 percent 

higher than those for any other region. Most significantly, land ownership 

costs in the California rice-growing area are nearly three times those of the 

Mississippi River Delta region. These high land costs likely contribute to the 

region’s small average farm size of 407 harvested acres of rice per farm as 

compared to the national average of 453.13

While California is a high-cost region, rice acreage there has increased since 

the early 1990s. This apparent contradiction can be explained by several 

factors that differentiate Californian rice production from its counterparts 

in the South. First, while costs are higher on a per-acre basis, Californian 

rice producers are able to spread these costs over a much larger production 

quantity since their average yields are the highest in the nation, reaching 

8,600 pounds per acre in 2009, or 21 percent higher than the U.S. average. 

In addition, California almost exclusively produces high-quality medium/

short-grain rice (with a substantial amount grown for the WTO market access 

commitments), which is often sold at a premium of $2 to $3 per hundredweight over long-grain varieties (the premium has risen in recent years and 

was more than $10 per cwt in 2008).14 The drought-induced contraction of 

Australian medium-grain exports, as well as continued export restrictions 

by Egypt, have supported California’s prices in recent years. This difference 

in production value, combined with the lack of alternative crops for most 

growers in the Sacramento Valley, indicates that rice acreage in California is 

not expected to decline in the near term, despite rising per-acre costs.

13 While average farm size in California is smaller than the U.S. average, it 

is important to note that farm size and 

operation size are not identical. Many 

operators rent additional farmland or 

farm in tandem with a family member 

or other partner in order to spread 

operating costs over a greater area.

14The season-average farm price for 

long-grain rice averaged $11.01/cwt 

between 2005/06 and 2008/09, while 

medium/short-grain rice—including 

medium/short-grain rice produced in 

the South—averaged $15.25/cwt.
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Similar to other crop and livestock sectors in the U.S. agricultural system, 

the rice industry has adapted to changing market conditions and competitive 

pressures by concentrating production in specialized, larger scale operations. The share of production accounted for by smaller producers and those 

in higher cost regions has diminished. As the number of producers declines, 

questions about the future number, size, location, and characteristics of rice 

farms hinge on economic and policy factors affecting the mobility of farmers 

into and out of the rice sector. 

Even if annual economic returns are comparable or superior to other farm 

activities, entry decisions can be affected by factors such as large financial 

outlays to acquire suitable land and equipment to operate on a scale that 

provides both profits (per-acre or per-unit returns above costs) and household 

income above the next best alternative. These investments are startup costs 

that are typically financed by loans and involve a long repayment period. 

Similarly, once investments are made, decisions to switch farming activities, 

or to exit entirely, are affected by potential returns to other commodities, 

lost value to specialized equipment, or how off-farm income compares to 

farm income for an operator with a given set of skills and education. Entry 

barriers and incentives (disincentives) for existing farmers to remain in (exit) 

production affect not just the number of farms, but characteristics such as the 

ownership structure and age of their operators. Those entering rice farming 

generally have rice-farming parents or the support of another rice farmer—

typically a relative (Coats, 2009). 

Limited Availability of Suitable Land and 

High Startup Costs Deter Entry

As the scale of the average rice farm continues to grow, potential entrants 

face two major challenges: Limited area suitable for rice production and high 

startup costs. These constraints affect the number of new entrants as well as 

the business arrangements and other characteristics of existing rice farmers.

Land Constraints—As explained in the box, “U.S. Rice Industry 

Overview,” only a few States have areas that are physiologically suited to 

growing rice. Aside from certain areas in the Mississippi River Delta that 

could expand rice production, there is limited suitable land left that is not 

already in a rice cropping rotation. This shortage of additional rice land 

has helped to drive up the cost of land in current 

rice-producing areas. 

Startup Costs—Given the scale of operation needed to be profitable, new rice farmers must make significant investments in both land 

and equipment. The 2007 agricultural census identified rice farms as 

having the highest value of land, buildings, machinery, and equipment 

(including irrigation equipment) per farm of all major commodities on 

a national level (fig. 3).15 High land values on rice operations are due 

to the large size of the average rice farm and the high average value of 

farmland per acre when compared with other operations. Even if a farmer 

Economic Factors Limit Rice Farm Entries 

and Shape Industry Structure

15These comparisons vary slightly by 

State, but in all rice-growing States, 

outlays for land/buildings and machinery/equipment for the average rice farm 

was either the highest of all field crops, 

or second only to cotton farms. Louisiana proved the only exception, where 

machinery/equipment values are a close 

third behind corn and cotton outlays.
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chooses to rent land rather than buy, comparatively high rental rates 

can be cost prohibitive. In addition, extensive irrigation and drainage 

systems, land laser-leveling equipment, and on-farm drying equipment 

also raise the level of investment required for rice production. 

High Land Costs Contribute to High Tenancy Rates

High land costs play a role in the ownership arrangements of rice farms. 

Averaged annual cost of production data from 2005 to 2009 show that nationally, the rental rate on rice land is the highest of all the major field crops at 

$131.95 per acre. That is 31 percent higher than corn’s rental rate, and nearly 

three times the rental value of wheat land (table 6). To spread potential debt 

exposure and to lower capital investment requirements, the strategy adopted 

by the majority of principal operators on rice farms has been to operate as 

either part-owners or tenants.16 Compared with other field crops, rice has 

the lowest overall percentage of farms under full ownership and the highest 

share of tenant farms, which is attributable to the high unit cost of rice land, 

the quantity of land required for a profitable farm, and efforts to manage total 

farm business risk exposure (fig. 4). 

The share of farms under part-ownership increased from 41 to 44 percent 

between 1992 and 2007 (fig. 5), while the share under full-ownership 

dropped from 24 percent in 2002 to 21 percent in 2007 (although it is slightly 

higher than in 1992). In contrast, the percent of farms under rental arrangements decreased over the period from 40 to 36 percent, though there was an 

increase in the percentage of farms rented from 2002 to 2007.

Data specific to type of farm organization suggest that many of the partowned rice farms are family farms (fig. 6).17 In 2007, 53 percent of rice 

farms were classified as “individual or family,” meaning that the farm could 

be owned by either one or multiple persons. A further 35 percent were operated under a partnership, with 10 percent operated as family-held corporations. Thus, taking into account the tenancy situation, just 40 percent of the 

Rice Corn Cotton Soybeans Wheat All farms

0

0.5

1.0

2.0

2.5

1.5

3.0

Figure 3

Rice farms have the highest per farm asset value among 

major field crops

Asset value (million $)

1

Includes irrigation equipment.

Source: USDA, NASS, Census of Agriculture, 2007.

Land and buildings

Machinery and equipment1

16The term “full owner” implies that 

the principal operator owns all land 

used in the farm operation, while a 

principal operator who is a part-owner 

owns a share of the land used in the 

farm operation and a tenant rents all of 

the farmland.

17A family farm is defined as any farm 

organized as a sole proprietorship, 

partnership, or family corporation, excluding farms organized as nonfamily 

corporations or cooperatives, as well 

as farms with hired managers. 
17

Consolidation and Structural Change in the U.S. Rice Sector / RCS-11d-01

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Figure 4

Just one-fifth of rice farms are fully owned by the operator

Percent

Source: USDA, NASS, Census of Agriculture, 2007.

80

70

60

50

40

30

20

10

0

Rice Corn Cotton Soybeans Wheat All farms

Full-owner

Part-owner

Tenant

Table 6

Average U.S. production costs and returns for selected field crops, 2005-091

Corn Cotton Rice Soybeans Wheat

Dollars per planted acre

Total, gross value of production 454.36 477.88 846.33 352.71 208.32

Operating costs:

 Seed 54.40 62.74 43.13 40.86 11.63

 Fertilizer 102.87 65.35 85.17 17.65 40.19

 Chemicals 24.85 63.82 66.93 15.21 9.12

 Custom operations 10.89 23.52 50.35 6.58 7.17

 Fuel, lube, and electricity 31.71 45.41 108.48 15.21 19.24

 Repairs 14.87 28.77 26.61 12.32 12.91

 Purchased irrigation water 0.13 2.36 11.27 0.12 0.34

 Interest on operating capital 3.08 4.11 22.31 1.80 1.32

 Other operating costs2 0.00 105.96 5.32 0.00 0.00

 Total operating costs 242.81 402.04 415.11 109.74 101.91

Allocated overhead:

 Hired labor 2.26 14.80 21.41 1.98 2.58

 Opportunity cost of unpaid labor 24.14 29.14 44.49 16.35 22.41

 Capital recovery of machinery and equipment 71.67 100.90 104.46 64.40 55.14

 Opportunity cost of land (rental rate) 100.96 55.13 131.95 93.00 45.76

 Taxes and insurance 7.76 8.17 18.06 8.64 8.07

 General farm overhead 13.72 16.26 25.18 13.69 8.77

 Total allocated overhead 220.51 224.40 345.55 198.05 142.72

Total costs listed 463.33 626.44 760.66 307.79 244.63

Value of production less total costs listed -8.96 -148.56 85.67 44.92 -36.32

Value of production less operating costs 211.55 75.85 431.22 242.97 106.41

1Excludes Government payments.

2 “Other operating costs” include ginning for cotton and commercial drying for rice.

Source: USDA, ERS, Cost of Production Dataset, 2010. The Cost of Production Dataset accounts are developed using base year 2006 Agricultural 

Resource Management Survey data. The base year estimates are updated to the current year through the use of price indices, acreages, yields, and 

other factors.
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farms reported as “individual or family” operations are run by a sole owner. 

While there has been no clear trend regarding changes in farms reported 

as individual, family, or family-held corporations since 1992, the share of 

partnerships has increased from 23 to 35 percent. The increased frequency 

of partnerships is likely a means to defray costs and reduce debt burden on 

individual owners. This is further supported by a comparison of the average 

size of farms organized under different arrangements—“Partnership” farms 

reported an average size nearly double that of “Individual/Family” farms. 

Full−owner Part−owner Tenant

Figure 5

Part-ownership arrangements are becoming more common 

for rice producers

Percent

Source: USDA, NASS, Census of Agriculture, 1997, 2002, 2007.

50

40

45

30

25

35

20

15

10

0

5

1992

1997

2002

2007

Figure 6

More than half of all rice farms are owned by individuals or families

70

60

50

40

30

20

10

0

Source: USDA, NASS, Census of Agriculture, 1997, 2002, 2007.

Individual or 

family

Partnership Corporation Family−held 

corporation

Other

corporation

Other

1992

1997

2002

2007

Percent
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High Costs of Rice Farming May Play a Role 

in Skewed Farmer Age Distribution

The changing age characteristics of rice farmers also suggest that the high 

costs of obtaining farm assets and lack of available land are deterring new 

entrants into the rice-farming industry (fig. 7). Since 1992, the age distribution of rice farmers has consistently shifted towards older operators, indicating that new entrants are either older than previously and/or that existing 

operators are exiting at a slower rate than the pace of new entrants. In 1992, 

34 percent of rice farmers were over the age of 55. By 2007, that number 

had increased to 47 percent.18 The role of high startup and overhead costs 

on entry decisions and the age structure of rice farmers is reinforced by data 

on debt-to-asset ratios from the 2006 ARMS. Rice farmers under the age of 

50 have debt-to-asset ratios of 22 percent—double the average debt-to-asset 

ratio of farmers in the 50-64 year-old demographic. Furthermore, producers 

under 50 have an average farm size 15 percent lower than farmers in the 

50-64 year-old age group. 

Previous studies on beginning farmers argue that one reason why there are 

declining numbers of younger farmers is that many are going to college to 

obtain skills that will help them make more educated business decisions 

in the operation of their enterprise (Ahearn and Newton, 2009). For rice 

farmers, the youngest age grouping had the highest share of operators who 

had attended at least some college (35 percent), but the lowest share of operators who had actually completed college (24 percent). Farmers in this age 

group were just as likely to diversify their production as their counterparts in 

the other categories, evidenced by the same average number of commodities 

produced per farm.

Source: USDA, NASS, Census of Agriculture, 1997, 2002, 2007.

1992

1997

2002

2007

Figure 7

The average age of U.S. rice farmers is increasing

Percent

Age group

35

30

25

20

15

10

5

0

Under 25 25 to 34 35 to 44 45 to 54 55 to 64 65 and over

18Rice farmers are on average much 

older than the working population 

at large. There are several possible 

explanations for this difference. First, 

young or beginning rice farmers must 

acquire substantial amounts of land 

and capital to establish their business 

as a profit-making venture. One manner in which younger farmers acquire 

large amounts of land is through inheritance (Ahearn and Newton, 2009). 

However, since the older generations 

of farmers are living and working 

longer, inheritance decisions are being 

delayed. 
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Despite the considerable challenges confronting potential rice farmers or 

those wishing to expand the scale of their operations, ARMS data indicate 

that economic incentives for existing rice farmers to remain in operation 

remain comparatively strong among major U.S. field crops. Along with some 

exit barriers that may limit alternatives even for some less profitable rice 

enterprises, this suggests that rice acreage is likely to remain relatively stable 

in the future. Additionally, increased productivity and more efficient resource 

use through improved agronomic management practices have allowed many 

producers to lower per-unit costs on existing rice area in order to remain 

competitive. 

As with other field crops, returns to rice fluctuate depending upon global 

market conditions. In fact, rice producers stand to make substantial returns 

if international markets are favorable, despite the significant investments 

needed for rice production and the substantial operating costs per acre (rice 

operating costs per acre were 5 to 250 percent higher than those of other 

major field crops in 2009) (table 7).19 When global prices were high in 2009, 

rice producers netted $229 per acre on average after accounting for total 

production costs and not including Government payments. Producers of 

soybeans, the next most profitable crop on a per acre basis, earned $79 

per acre. 

Moreover, the large difference in returns among major field crops in 2009 

was not a unique occurrence. Taking a 5-year average of value of production per acre less total costs from 2005-2009 (keeping in mind that annual 

variation in rice yields is small), rice is still the most profitable crop per acre, 

with net returns to rice production nearly double those of soybeans, and well 

above cotton, wheat, and corn (which all had negative returns).20

However, national average net returns to rice production were highly variable over the period, with a coefficient of variation at least twice as large 

as those for wheat, soybeans, and cotton. This variability in returns can be 

directly attributed to the volatility of input prices and rice farm prices, not to 

any large variation in yields. Such a high variability in returns suggests that 

while rice farming is a profitable enterprise on average, a significant share 

of producers faced negative returns over the period, likely due to management decisions that significantly altered input costs structures and marketing 

choices. Additionally, the variability in net returns is substantially reduced 

when only operating costs are considered in lieu of total economic costs. It is 

important to note that the returns presented here for rice and all other crops 

are averages for nationwide data. In some production regions, returns to rice 

production may be the least variable option as a result of cost structure and/or 

productivity of alternative crops. 

Even among rice farms that do not typically cover total economic costs, a 

number of factors may encourage rice farmers to continue growing rice for 

an extended period. These factors include ability to cover operating costs, 

Economic Returns to Rice Production 

Remain Comparatively High

19Operating costs for rice farms are 

high largely because of energy costs 

for irrigation. Rice farmers are particularly vulnerable to high energy costs 

because of the need to run irrigation 

pumps to keep fields flooded. Because 

large quantities of water are needed 

(typical flood after sprouting is 2-4 

inches deep over the entire field), rice 

producers also have the highest costs 

for purchased irrigation water (for 

those producers who need to purchase 

water), nearly four times higher than 

per-acre costs for cotton. Additionally, 

a large portion of growers must incur 

commercial drying costs before they 

are able to sell their rice, though an 

increasing percentage of producers are 

investing in on farm drying facilities 

to reduce these costs.

20While value of production per acre 

less total costs was negative for three 

of the five main field crops, value 

of production minus operating costs 

was positive for all five, ranging from 

$75.85 for cotton to $431.22 for rice. 

These returns do not include Government payments.
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limited availability to diversify farm operations, and lack of off-farm employment opportunities, discussed below.

Ability to cover operating costs—In marketing year 2000, ARMS data 

indicate that only 43 percent of U.S. rice farmers were able to cover 

both operating costs and costs of asset ownership at that year’s average 

price of $5.61/cwt, not adjusted for inflation. However, 78 percent of rice 

farms were able to at least cover operating costs in that year.21 Furthermore, Livezey and Foreman (2004) report that in 2000, nearly 97 percent 

of rice operators were able to cover operating costs with the addition of 

government payments, with 84 percent covering total economic costs as 

well.22 Since 2000, both operating costs and ownership costs have risen 

substantially. The percentage of rice farmers that are now able to cover 

total economic costs at today’s prices and costs is unknown. 

Limited ability to diversify farm operations—As with other major 

U.S. field crops and agricultural farms, rice farms did not have a single 

crop dominating total acreage. U.S. rice farms in 2006 had an average 

of 1,580 acres, of which 504 acres (harvested) was devoted to rice. 

Table 7

Net returns measures for corn, cotton, rice, soybeans, and 

wheat, 2005-09

Average value of production less total costs

Corn Cotton Rice Soybeans Wheat

Dollars per acre

2005 -126.45 -87.54 -234.50 0.18 -74.77

2006 -57.87 -170.46 -57.83 -23.25 -72.77

2007 24.97 -29.20 42.15 58.26 -27.88

2008 99.98 -195.97 449.69 110.32 56.43

2009 14.55 -259.62 228.85 79.10 -62.59

5-year average -8.96 -148.56 85.67 44.92 -36.32

Standard deviation 86.27 90.87 263.63 55.39 55.16

Coefficient of variation 9.62 0.61 3.08 1.23 1.52

Average value of production less operating costs

Corn Cotton Rice Soybeans Wheat

Dollars per acre

2005 74.06 107.43 94.02 174.36 53.23

2006 145.89 28.15 256.66 161.43 59.00

2007 239.95 200.33 376.85 252.12 111.08

2008 333.67 45.56 808.73 318.66 208.15

2009 264.18 -2.23 619.86 308.29 100.57

5-year average 211.55 75.85 431.22 242.97 106.41

Standard deviation 102.11 80.28 285.14 73.20 62.21

Coefficient of variation 0.48 1.06 0.66 0.30 0.58

Note: Government payments not included.

Source: USDA, ERS, Cost of Production Dataset, 2010. The Cost of Production Dataset accounts are developed using base year 2006 Agricultural Resource Management Survey (ARMS) 

data. The base year estimates are updated to the current year through the use of price indices, 

acreages, yields, and other factors.

21The negative average net returns 

from 2005 to 2006 suggest that a large 

portion of producers were unable to 

cover total economic costs in those 

years while positive average net 

returns from 2007 to 2009 suggest the 

opposite.

22In 2000, Government payments 

accounted for more than half of total 

revenue received by the U.S. rice 

farming sector. However, since 2005, 

rice farmers have only received direct 

payments.
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23ERS defines net cash income as the 

cash earnings realized within a calendar year from the sales of farm production and the conversion of assets, 

both inventories (in years in which 

reduced) and capital consumption, into 

cash. Unlike net farm income, net cash 

income does not include the value 

of home consumption, changes in 

inventories, capital replacement, and 

implicit rent and expenses related to 

the farm operator’s dwelling. Net cash 

income is a solvency measure representing the funds that are available to 

farm operators to meet family living 

expenses and make debt payments.

Farms with larger rice enterprises tended to have about the same level 

of commodity diversification as farms with smaller rice acreage with 

an average of 2.3 commodities per rice farm. Soybeans and wheat were 

the most commonly reported alternative or rotation crops, though corn 

and cotton were also important in certain regions. (For comparison, 

the average corn farm in 2001 had 236 acres of corn, 667 total operated acres, and an average of 3.6 commodities per farm). However, 

commodity diversification for rice farms varied substantially by region, 

with those in the Arkansas Non-Delta and Mississippi River Delta 

each averaging 2.7 commodities per farm in 2006, while those on the 

Gulf Coast averaged only 1.6 commodities and those in California 1.4 

commodities. In California, 68 percent of rice farms grew only rice, 

and the same was true of 55 percent of rice farms on the Gulf Coast. In 

contrast, more than 95 percent of rice farms on the Mississippi River 

Delta and the Arkansas Non-Delta grew at least one alternative or 

rotation crop. 

This lack of diversification in California and Gulf Coast rice farms is 

primarily due to the lack of a viable alternative crop. In the California 

rice-growing area, the soil types are unsuitable for most other crops, 

although some farms can rotate rice with certain vegetable crops—particularly tomatoes. The Gulf Coast’s heavy rainfall, extremely hot, long 

summers, and periodic hurricanes limit the adaptability of other crops to 

the area. The Gulf Coast also lacks the infrastructure necessary to make 

alternative crops economically viable, although nearly a quarter of rice 

farms in the region raise cattle as well as produce rice.

Lack of off-farm employment opportunities—Exits may also be 

delayed because rice farming generates higher income compared with 

most other opportunities in rural areas. In the 2006 ARMS, average net 

cash income generated from a U.S. rice farm was reported at $142,000.23

In the rural communities where rice is produced, there are few other 

employment opportunities that offer the potential of such high earnings, especially given that only 32 percent of rice farmers hold college 

degrees. Furthermore, there is evidence that exit delays are more 

common among farmers (as compared to non-farmers) since they often 

live at the site of their business (Ahearn and Newton, 2009). Continued 

farming by older operators is also facilitated by increased mechanization 

and technological innovation, which make rice farming much less laborintensive than in past generations for many producers. 

Rather than completely retire, many producers chose to continue farming 

on a reduced scale—whether through a joint-operator arrangement, 

renting out land, or scaling back operations—until well after the average 

U.S. worker would have retired. In 2006, operators over the age of 65 

farmed the fewest average acres of the three age groups identified and 

had the highest percentage of operators who owned their land. Farmers 

in this category also had the highest average number of operators per 

farm, suggesting that at least some production decisions or farm operations had been entrusted to another individual. Farms in this category 

also had the lowest debt-to-asset ratio, but earned less on average than 

farms run by younger operators.
23

Consolidation and Structural Change in the U.S. Rice Sector / RCS-11d-01

Economic Research Service/USDA

Results of the USDA 2011 long-term baseline projections to 2020 indicate a 

continuation of many of the previously described trends in characteristics and 

structure of the U.S. rice farming industry (USDA, 2011). The most important trends expected to continue over the next decade are: 

•	increasing concentration of rice acreage and share of total output in the 

Delta and away from the Gulf Coast

•	steady yield growth

•	increasing area and production after 2012

•	declining rice farm numbers and increasing average farm size 

•	greater specialization in varieties grown and market outlet 

•	rising per-acre and per-hundredweight production costs

•	greater reliance on market returns

•	increased investment in building and equipment for rice production 

•	continued heavy reliance on the global market for sales

The 2011 baseline projections indicate U.S. rice acreage over the next decade 

will average slightly less than 3.3 million acres per year, well below the 

record 3.8 million acres planted in 1981, but close to the nearly 3.3-million 

acres planted on average each year from 2001 to 2005. After declining in 

2011 and 2012 from 2010’s near-record level, U.S. rice acreage is projected 

to increase each year from 2013 through 2016 and then stabilize at around 

3.3 million acres. From 2013-16, U.S. rice farm prices are projected to be 

high enough to pull additional land into rice production, given expectations regarding production costs and net returns for rice and other planting 

options (fig. 8). In fact, despite rising costs, net returns to rice are expected 

to increase each year in the baseline period after 2012—mostly due to higher 

prices. Although rising rice prices more than offset the steady increase 

in costs, net returns are projected to remain well below 2007-09 levels 

throughout the projection period. From 2014 onward, net returns per acre to 

rice exceed other planting options by an increasing margin, encouraging a 

small boost in rice acreage in competitive regions. Strong competition in the 

global market—especially in the long-grain milled market—and only modest 

expansion in the U.S. rice market limit the increase in rice acreage.

With rice acreage projected to stabilize around 3.3 million acres by 2016 

and production costs projected to steadily increase throughout the baseline 

period, it is likely that the average rice acreage per rice farm will increase as 

smaller rice farms continue to exit the industry due to production cost inefficiencies. The rate of decline in the number of rice farms is projected to 

slow, as smaller farms with less than 100 acres of rice now account for just 

17 percent of total rice farms and 2 percent of U.S. rice acreage. Additionally, the emergence of higher value niche markets (such as organic or other 

specialty rice varieties) may provide new business opportunities for small 

rice farms, allowing them to remain in the industry.

USDA 10-Year Baseline Projections 

Indicate Continued Farm Consolidation
24

Consolidation and Structural Change in the U.S. Rice Sector / RCS-11d-01

Economic Research Service/USDA

Gulf Coast Expected To Lose More Rice Acres

The high-cost rice producing areas along the Gulf Coast are expected to 

continue losing rice acres, although the rate of decline will likely be slower 

than in the previous decade. Prices are not projected to be high enough for 

all current producers on the Gulf Coast to cover their total production costs 

(fixed and variable) and remain in rice farming over the long-term. While 

prices are projected to be sufficient to cover variable costs for most operators, they will not cover full production costs—including opportunity cost of 

land and ownership, taxes, interest on debts, and capital costs. Farm exits will 

continue to occur for many producers in areas that no longer have a competitive advantage in rice production. 

By contrast, rice acreage is expected to increase in the lower cost Arkansas 

Non-Delta rice growing area, with Missouri and Northeast Arkansas likely to 

gain the most acreage. The California rice area is expected to remain nearly 

unchanged over the baseline, as growers in this State have few alternative 

planting options. Prices for medium- and short-grain rice are projected to 

remain well above long-grain prices over the baseline. 

Though acreage is expected to stabilize after 2016, average U.S. yields are 

expected to rise 1 percent a year over the next decade. The increasing yields 

are largely due to further adoption of new high-yielding varieties in the South 

and improved management practices in all regions. The higher yields help 

offset rising per acre production costs and help the U.S. to remain competitive in certain global markets. Higher yields are critical for many U.S. 

growers to remain economically viable.

0

100

200

300

400

500

600

700

2007 09 11 13 15 17 19

Figure 8

Rice farming is projected to remain more profitable than 

alternative planting options1

Dollars per acre

August-July market year 1

Net returns over variable costs.

2011 to 2020 = forecast.

Source: USDA, USDA Agricultural Projections to 2020, February 2011. 

Upland cotton 

Soybeans

Corn

Rice

Wheat
25

Consolidation and Structural Change in the U.S. Rice Sector / RCS-11d-01

Economic Research Service/USDA

Average Farm Size Projected To Continue Increasing 

Rising production costs and benefits from economies of scale will continue 

to promote larger farm sizes, and because total rice area is not expected to 

increase much, the number of rice farms will decline. With rough-rice farm 

prices expected to rise less than 2 percent a year from 2015 to 2020—about 

the same as the annual projected increase in per acre variable costs for 

producing rice—growers will remain under pressure to cut costs by boosting 

acreage and making greater investments in capital equipment. 

Larger farms and expanded rice acres per farm will allow fixed costs to be 

spread over more output, as well as justify increased investment in expensive—but potentially cost-reducing—equipment. Modern rice machinery—

such as 18-row planters and harvesters, irrigation and pumping facilities, 

and water recycling systems—is only cost-effective if utilized on substantial 

acreage. While higher yields will continue to lessen the impact of rising 

production costs for growers in all size categories, the larger farms will have 

increasing advantages due to lower per-unit costs. 

Even in the low-cost Arkansas Non-Delta rice-growing area, rising irrigation 

costs will favor producers who are more efficient with water use. This could 

favor either producers whose farms have access to a shallow water table 

(such as those in Missouri and along parts of the Mississippi River) and/or 

those who make investments in water management structures and equipment. 

Over the past two decades, Arkansas’ historic rice production regions (particularly the Grand Prairie) have increasingly struggled with adequate ground 

water availability, due to increasing irrigated row crop production and rapidly 

rising urban demands for water, particularly around the Jonesboro area in 

the Northern Arkansas Non-Delta. While additional irrigation water can be 

found in the deeper Sparta aquifer (covering South Arkansas and North Louisiana), the costs of pumping these water reserves is cost prohibitive for most 

producers. Increased water scarcity is not unique to the Arkansas Non-Delta; 

for all rice-growing regions, access to water could become a constraint as farmers are forced to compete with urban areas for declining water resources.24

Market Factors Will Drive the Rice Industry

USDA’s long-term baseline indicates that both domestic and global rice 

prices will remain well above levels that would make growers eligible for 

either counter-cyclical payments or marketing loan benefits. However, under 

the 2008 Farm Act, direct-payment contract holders will still receive annual 

payments that are decoupled from current production levels and prices. As 

annual rice prices rise after 2012, market returns as a share of total farm 

revenue from rice will increase, making the industry very responsive to 

market signals. By contrast, from 1999-2002 total direct payments accounted 

for more than half of annual rice enterprise revenues, allowing some less efficient growers to remain in operation.25

The U.S. rice-farming industry is expected to continue growing for specific 

markets, such as for U.S. table rice, processed foods, beer, rough-rice 

exports, milled-rice exports, and aromatic rice. Many sales in the U.S. are 

variety-specific, aimed at a particular end product. This encourages more 

specialization and contracting.

24The struggle between competing 

water uses is already a major issue in 

California. The State has a complicated system of water regulations that 

stipulate who may use certain water 

resources, when the water can be used, 

and at what price. Though most rice 

producers in the Sacramento Valley 

have senior claims with first rights to 

the water, recent droughts have called 

these rights into question. In some 

cases, it is more profitable for rice 

growers to sell their water rights to 

urban centers rather than use them for 

growing rice. For more information 

on water rights in California, see the 

California Division of Water Rights 

webpage at http://www.waterboards.

ca.gov/waterrights/.

25Direct payments are now defined 

as the total of fixed annual payments, 

counter-cyclical payments, and 

marketing loan benefits. A decade 

ago, direct payments consisted of PFC 

payments, marketing loan gains, and 

market loss assistance payments.
26

Consolidation and Structural Change in the U.S. Rice Sector / RCS-11d-01

Economic Research Service/USDA

The industry is expected to remain bifurcated, with the South growing 

almost all of the long-grain rice, and California growing almost exclusively 

medium- and short-grain rice. Southern medium- and short-grain rice is 

expected to continue being used in processed products and for shipment to 

specific medium-grain export markets. To date, growers in the South have 

been unable to produce medium-grain varieties comparable in quality to 

California’s Calrose variety due to climate and soil conditions, which helps to 

support California’s prices. 

The development of a high-quality aromatic variety that could compete with 

imported Asian rice would have a major impact on the structure of the U.S. 

rice farming industry as well. Historically, U.S.-grown aromatics have not 

been identical in quality to imported varieties. Researchers in the South are 

currently developing aromatic varieties that may substitute for these highpriced imports in the U.S market. The recently released Jazzman rice variety 

may become a viable substitute for imported jasmine rice from Thailand. 

Export Markets To Remain Vital for U.S. Growers

as Domestic Market Growth Slows

The domestic rice market is expected to expand about 1.1 percent annually from 2011 to 2020, well below the almost 5-percent annual expansion 

achieved in the 1980s, the 3- to 4-percent rate achieved in the 1990s, and 

the more-than-2-percent achieved in the early 2000s. Per capita U.S. rice 

consumption doubled between 1980 and 2000 mostly because of demographic changes (especially immigration of Asian and Hispanic groups for 

whom rice is a cultural staple food) and a host of new rice products offered 

in an era of low farm- and wholesale-rice prices. These growth rates in the 

domestic market will not likely be repeated because of diet diversification 

by second- and third-generation Asian-Americans, higher rice prices, and 

intense competition in the food industry for new products. 

With slowed domestic sales, U.S. rice producers are projected to become 

increasingly dependent on the export market as a source of sales. Over the 

next decade, slightly more than half of the U.S. rice crop is forecast to enter 

the global market, as the domestic market is not expected to expand at a 

rapid enough pace to absorb a larger share. Currently, about half the crop is 

exported each year. The growing dependence on exports prevents U.S. rice 

prices from substantially rising above global levels, since a wide price difference would reduce foreign demand. 

Although the United States was the largest rice-exporting country 30 years 

ago, in 2011 it is projected to be the third-largest exporter, behind Thailand 

and Vietnam. The U.S. accounts for about 11 percent of global exports, but 

this share is expected to drop to just over 10 percent by 2020, despite a slight 

expansion in U.S. shipments each year. The U.S. is expected to be the fourthlargest exporter over the next decade, with India overtaking the U.S. by 2012. 

U.S. prices are not projected to be high enough over the next decade to attract 

sufficient additional acreage for the U.S. to maintain or increase its global 

market share. Higher U.S. prices would make the U.S. uncompetitive in the 

global market.
27

Consolidation and Structural Change in the U.S. Rice Sector / RCS-11d-01

Economic Research Service/USDA

This report drew on the most recent data available to identify structural 

changes in the U.S. rice-farming industry, particularly the declining number 

of U.S. rice farms. We argue that the falling number of rice farms does not 

signal a decline in the industry. While the number of farms has declined, 

average farm size has increased, and total harvested area typically fluctuates around 3.1 million acres. There are now more rice farms planting over 

1,000 acres of rice than ever before. These very large farms account for an 

increasing share of production and sales.

As farm sizes have increased, cost structures have changed. Increased farm 

size is correlated with efforts to reduce unit costs in a very high fixed-cost 

industry. Yield differences between small and large farms are small. Additionally, increased concentration of rice production in lower-cost production 

areas of the South is further evidence of the importance of lowering unit costs 

in the effort to remain competitive. Production costs among Southern ricegrowing regions are highest along the Gulf Coast, and this region has lost the 

most farms and experienced the largest reduction in total rice area over the 

past decade.

High barriers to entry for beginning farmers, principally the high fixed-cost 

investments required for rice farming, may be exacerbating the reduction 

in net farm numbers, as acquiring the land and capital to generate sufficient 

profits and household income can be financially challenging. Beginning 

farmers often start out with the financial backing of a parent, family-member, 

or mentor. 

Despite the high costs associated with rice farming, comparatively high 

returns to rice vis-à-vis other crops have kept total rice acreage stable over 

most of the period. However, rice farmers have and likely will continue to 

experience large variation in input costs and price volatility.

Consolidation and high fixed costs will likely persist in the U.S. rice industry. 

The USDA 2011-20 baseline projections anticipate the continuation of farm 

consolidation and regional industry shifts. In the long-term, total rice area is 

projected to remain stable as net returns to rice production remain higher than 

returns for other major field crops. However, year-to-year fluctuations in area 

will occur due to weather phenomena and the potential for interventionist 

policies by many of the world’s largest rice-consuming countries.

Conclusions
28

Consolidation and Structural Change in the U.S. Rice Sector / RCS-11d-01

Economic Research Service/USDA

Ahearn, Mary, and Doris Newton. 2009. Beginning Farmers and Ranchers, 

EIB-53, USDA, Economic Research Service, May 2009. Available at: 

http://www.ers.usda.gov/publications/eib53/.

Ali, Mir. 2002. Characteristics and Production Costs of U.S. Wheat Farms, 

SB-974-5, USDA, Economic Research Service, July 2002. Available at: 

http://www.ers.usda.gov/publications/sb974-5/.

Brooks, Nora. 2001. Characteristics and Production Costs of U.S. Cotton 

Farms, SB-974-2, USDA, Economic Research Service, October 2001. 

Available at: http://www.ers.usda.gov/publications/sb974-2/.

Coats, Robert. 2009. Personal Interview. University of Arkansas Extension, 

August 2009.

Foreman, Linda. 2006. Characteristics and Production Costs of U.S. Corn 

Farms, 2001, EIB-7, USDA, Economic Research Service, February 2006. 

Available at: http://www.ers.usda.gov/Publications/eib7/.

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Available at: http://www.ers.usda.gov/publications/sb974-4/.

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March 2004. Available at: http://www.ers.usda.gov/publications/sb974-7/.

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MacDonald, James. 2008. The Economic Organization of U.S. Broiler 

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MacDonald, James, Erik O’Donoghue, William McBride, Richard Nehring, 

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