The Food, Conservation, and Energy Act of 2008 (2008 Farm Act)
provides rice producers access to marketing loan benefits, direct
payments (DPs), counter-cyclical payments (CCPs), and average crop
revenue election (ACRE) payments. New to the 2008 Act are separate
program parameters for medium- (which includes both medium-grain
and short-grain rice) and long-grain rice. In addition, many
producers may benefit from subsidized crop and revenue insurance
available under previous legislation, as well as from new permanent
disaster assistance. Moreover, rice producers are affected by
conservation and trade programs.
Under the 2008 Farm Act, program participants are given almost
complete flexibility in deciding which crops to plant. Farmers are
permitted to plant all cropland acreage on the farm to any crop,
with some limitations on planting fruits and vegetables on acreage
eligible for DPs and CCPs. Eligibility for DPs and CCPs is based on
historical production parameters, and no commodity production is
required to receive payments, but the land must be kept in
agricultural use (which includes fallow). Participants in all
programs must comply with certain conservation and wetland
General information follows on government programs affecting
rice producers' management decisions and incomes. For further
information, see the Program Provisions section
in the Farm and Commodity Policy topic page, the Farm Risk
Management topic page, and the Conservation
Policy topic page.
Loans and Loan Deficiency Payments
The 2008 Farm Act extends nonrecourse commodity loans with
marketing loan provisions for crop years 2008-12. National loan
rates are set in the legislation, with the loan rates for medium-
and long-grain rice set at $6.50 per hundredweight for crop years
The marketing assistance loan program offers short-term
financing in all price environments, as well assists producers when
market prices are low. Because the loans are nonrecourse, producers
may forfeit the crop rather than pay back the loan if prices fall
below the loan rate plus interest.
To avoid forfeitures, the marketing loan provisions allow
producers to repay commodity loans at a rate less than the original
loan rate plus interest when the adjusted world price (AWP)
for rice (as calculated by USDA) is below the commodity loan
rates plus interest. USDA operates the program this way to minimize
potential commodity loan forfeitures and subsequent Government
accumulation of stocks. When producers repay their nonrecourse
commodity loans to USDA's Commodity Credit Corporation (CCC) at a
rate less than the loan rate, the difference between the two rates
is called a marketing loan gain (MLG) and represents a program
benefit to producers. In addition, any accrued interest on the loan
Producers can also receive an equivalent benefit in the form of
a loan deficiency payment (LDP) if they choose not to participate
in the loan program. In this case, the producer can opt to receive
a one-time payment on harvested production at any time the AWP is
below commodity loan rates during the term of the loan. The
difference between the AWP and the loan rate is the LDP rate.
For further information, see the Marketing
Assistance Loans and Loan Deficiency Payments page in the Farm
and Commodity Policy topic.
Direct and Counter-Cyclical
DPs and CCPs are available to eligible landowners and producers
with rice base acres who enter into an annual agreement with USDA's
Farm Services Agency (FSA). Base acres and payment yields of rice
on the farm are apportioned using:
- The 4-year average of the percentages of acreage planted in the
applicable State to the sum of long-grain rice and medium-grain
rice during crop years 2003-06 or
- The 4-year average of acreage planted (including prevented
plantings) on the farm to the sum of long-grain rice and
medium-grain rice during crop years 2003-06. In the case of a crop
year for which a producer elected not to plant long-grain and
medium-grain rice during crop years 2003-06, the percentages of
acreage planted in the applicable State to long-grain rice and
medium-grain rice are used.
Payment acres for DPs are reduced to 83.3 percent of base acres
for crop years 2009-11. Payment acres for CCPs are unchanged at 85
percent of base acres.
DPs are made based on a fixed rate set in the 2008 Farm Act. For
producers with eligible historical rice base acreage, the payment
rates for medium- and long-grain rice are set at $2.35 per
hundredweight for crop years 2008-12. The amount of the DP equals
the product of the payment rate for the specific crop, a producer's
historical payment acres (85 percent of base acres in crop years
2008 and 2012 and 83.3 percent in crop years 2009-11), and a
producer's historical payment yield for the farm.
For producers with eligible historical rice base acreage, CCPs
are paid whenever a commodity's target price is greater
than the calculated effective price for that commodity. Target
prices are specified in the 2008 Farm Act. The rice target prices
are $10.50 per hundredweight for medium- and long-grain rice for
crop years 2008-12. The effective price is equal to the sum of 1)
the DP rate for the commodity, and 2) the higher of the national
average farm price for the marketing year by class or the national
loan rate for the commodity. Thus, the minimum effective medium-
and long-grain rice prices are $8.85 per hundredweight--the sum of
the DP ($2.35 per hundredweight) and the national loan rate ($6.50
per hundredweight). The maximum payment rates for medium- and
long-grain rice are $1.65 per hundredweight--the target prices
($10.50 per hundredweight) minus the minimum effective prices
($8.85 per hundredweight). The payment amount equals the product of
the payment rate, a producer's historical payment acres (85 percent
of base acres), and a producer's historical CCP yield, which may
differ from the DP payment yield.
For further information, as well as conservation requirements
for payment eligibility, see the Direct Payments and Counter-Cyclical Payments pages in the Farm
and Commodity Policy topic.
Average Crop Revenue
The ACRE program is a new, FSA-administered program in the 2008
Farm Act. Beginning with the 2009 crop year, producers of rice and
other crops can elect this optional, revenue-based counter-cyclical
program, which is an alternative to receiving CCPs. However,
producers who choose to participate in ACRE also face reduced DPs
and lower marketing assistance loan rates.
Producers may elect the ACRE alternative on a farm-by-farm basis
for crop years 2009-12. Once in ACRE, the farm must remain in the
program through crop year 2012. After electing ACRE, the producer
must enroll annually to receive payments. Commodities eligible for
ACRE payments are all covered commodities (wheat, corn, grain
sorghum, barley, oats, upland cotton, rice, soybeans, other oilseeds, dry
peas, lentils, small chickpeas, and large chickpeas) and peanuts
for a participating farm. Also, as a condition for the farm's
enrollment in ACRE, direct payments for the farm are based on 80
percent of the legislated DP rate, and marketing loan benefits are based on 70
percent of the legislated national marketing loan rate.
The ACRE program provides participating producers a revenue
guarantee each year based on national market prices and State-level
average planted yields for the respective commodities. The
guarantee is based on a 5-year Olympic average of State-level
planted yields and a 2-year average of national market prices, but
payments depend on crop year State- and farm-level planted yields
and national market prices. ACRE payments are made if:
1) the actual State revenue per acre falls below the State
guarantee per acre
2) actual farm revenue per planted acre falls below the farm
benchmark revenue per acre.
State-level ACRE payments, if triggered, are paid on 83.3
percent (in crop years 2009-11) or 85 percent (in crop year 2012)
of the acreage planted or considered planted to
covered commodities and peanuts on the farm. The acreage for ACRE
payments may not exceed total base acreage for all
covered commodities and peanuts on the farm. Payments are adjusted
to farm-specific relative productivity using a ratio of the ACRE
benchmark State yield to the farm's 5-year Olympic average crop
yield per planted acre.
For further information, see the Average Crop Revenue
Election page in the Farm and Commodity Policy topic.
The 2008 Farm Act sets the payment limit for DPs at $40,000 per
person or legal entity and for CCPs at $65,000. There are no longer
payment limits for marketing loan benefits (MLGs and LDPs).
Payments are attributed directly to individuals, with spouses
potentially eligible for a full share. The three-entity rule is
eliminated. Authority for commodity certificates, formerly
available as an alternative to marketing loan gains when payment
limits were in force, ends after crop year 2009.
Producers with an adjusted gross farm income of more than
$750,000 (averaged over 3 years) are not eligible for DPs, but
remain eligible for other program payments. Persons or entities
with average adjusted gross nonfarm income in excess of $500,000
(averaged over 3 years) are not eligible for DPs and CCPs, ACRE
payments, marketing loan benefits, or disaster payments.
For more information, see the Payment Limits page in the Farm and
Commodity Policy topic.
Crop and Revenue Insurance
Adverse weather, as well as insect and weed infestations, can
reduce a farmer's yields and result in below-normal revenue in any
year. Low prices can also reduce revenue. Rice producers can
purchase crop insurance to guard against yield risk and can buy
revenue insurance for protection against revenue losses, regardless
of the source of loss. USDA's Risk Management Agency pays a portion of
producers' premium costs for insurance policies and also pays some
of the delivery and administrative costs of private insurance
companies that handle policy sales. For further information, see
the Crop Yield and Revenue Insurance page in the
Farm and Commodity Policy topic and the Risk Management topic.
Supplemental Agricultural Disaster Assistance, created in the
2008 Farm Act, provides disaster assistance payments to producers
of eligible commodities (crops, farm-raised fish, honey, and
livestock) in counties declared by the Secretary of Agriculture to
be "disaster counties," as well as counties contiguous to disaster
counties and any farms with losses in normal production of more
than 50 percent. For further information, see the Natural Disaster and Emergency Assistance
Programs page in the Farm and Commodity Policy topic area.
The 2008 Farm Act expands support for conservation practices on
all cultivated land (including fallow). To remain eligible for
specified program benefits, farmers cropping highly erodible land are
required to implement an approved conservation plan (highly
erodible land conservation provisions or sodbuster) and to be in
compliance with wetland conservation provisions (swampbuster).
Programs, such as the Environmental Quality Incentives Program
and the new Conservation Stewardship Program, provide assistance on
lands in production. Land retirement programs--including the
Conservation Reserve Program, the Conservation Reserve Enhancement
Program, and the Wetlands Reserve Program--remove environmentally
sensitive land from production and establish long-term,
resource-conserving cover. The acreage cap for the Conservation
Reserve Program is scheduled to decline from 39.2 million acres to
32 million acres beginning in fiscal year 2010 under the 2008 Farm
For details on environmental and conservation programs, visit
Conservation Programs topic page.
Export and Food Aid
Export programs administered by USDA's Foreign
Agricultural Service (FAS) and the U.S. Agency for
International Development (USAID) help promote and facilitate
purchase of U.S. rice in foreign markets. These programs include
the Export Credit Guarantee Program, the Market Access Program, and
the Foreign Market Development Program.
Export credit guarantees are designed to help foreign importers
facing foreign exchange constraints and needing credit to purchase
commodities. The Export Credit Guarantee Program (GSM-102)
underwrites commercial financing of U.S. agricultural exports by
guaranteeing repayment of private, short-term credit for up to 3
years. The CCC does not provide financing but guarantees payments
due from foreign banks, which allows U.S. financial institutions to
offer competitive credit terms to foreign banks.
The Market Access Program (MAP) aids in the
creation, expansion, and maintenance of foreign markets for U.S.
agricultural products. MAP forms partnerships between USDA's CCC
and nonprofit trade associations, cooperatives, trade groups, or
small businesses to share the cost of overseas marketing and
promotional activities. MAP partially reimburses program
participants for these activities, which include consumer
promotions, market research, trade shows, and trade servicing.
The Foreign Market Development Program, also known
as the Cooperator Program, aids in the creation, expansion, and
maintenance of long-term export markets for U.S. agricultural
products. The program enlists private-sector involvement and
resources in coordinated efforts to promote U.S. products to
foreign importers and consumers around the world. CCC funds are
used to partially reimburse cooperators conducting approved
overseas promotion activities.
The U.S. Government provides food aid overseas through the P.L.
480 program, the Section 416 program, the McGovern-Dole Food for
Education and Child Nutrition Program (FFE), and the Food for
Progress (FFP) program. Under P.L. 480 Title I, USDA makes
concessional sales that provide low-interest loans to qualified
developing countries purchasing U.S. commodities. Generally,
commodities shipped under Title I are purchased on the open market
by the recipient country. The Title II program, administered by
USAID, donates commodities to least-developed countries. The
Section 416(b) program provides for donations of CCC-owned surplus
commodities to developing countries. It also allows surplus CCC
commodities to be used for the purpose of P.L. 480 Title II
programs and the FFP program.
The McGovern-Dole Program helps support education, child
development, and food security for some of the world's poorest
children. The program provides U.S. agricultural product donations
and financial and technical assistance to support school feeding
and maternal and child nutrition projects in low-income,
food-deficit countries that are committed to universal education.
Under the Food for Progress Act of 1985, U.S. agricultural
commodities are channeled to developing countries and emerging
democracies committed to introducing and expanding free enterprise
in the agricultural sector. Commodities are currently donated to
foreign governments, private voluntary organizations, nonprofit
organizations, cooperatives, and intergovernmental
The Bill Emerson Humanitarian Trust authorizes a reserve of up
to 4 million metric tons of wheat, corn, grain sorghum, and rice to
provide food aid to developing countries in times of urgent
humanitarian needs. Currently, the reserve contains only cash as
remaining commodity stocks (wheat) were sold for cash in 2008 when
wheat prices were high.
For more details on these and other export programs, see the
Major Trade Programs topic page. The FAS website also provides
Export Program information.