Consolidation and Structural Change in the U.S. Rice Sector

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 capital-intensive 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.