Determinants of Variability in U.S. Rice Production Costs

This report identifies possible sources of cost variation among U.S. rice producers and determines which common farm organizational and operator characteristics are statistically associated with costs of production. The main findings are: (1) Most of the variation is explained by factors outside of the operator’s control, such as weather, quality of land and other resources, and shifts of input prices. (2) Significant determinants of per-unit production costs were capitalization costs (percent total depreciation claimed in 1992 relative to total production value), land tenure (percent of rice share-rented and percent of rice cash-rented), water management efficiency, and grain moisture level at harvest. (3) Of all variables, capitalization costs relative to production value, land tenure, water application efficiency, and grain moisture level at harvest had the greatest influence on per-unit cost variation, accounting for 94 percent of total variance effects on a national level. (4) In the Arkansas non-Delta, capitalization costs, both land tenure variables, and moisture level at harvest were positively related to costs, while only capitalization costs and moisture level at harvest were significant variables in California. In the Mississippi River Delta, capitalization costs, land share-rented, specialization, and water efficiency were positively related to per-unit costs. In the Gulf Coast, specialization and capitalization levels were positive significant variables.