A level playing field in agricultural policy

Those who know little about production agriculture will often ask us why we have a farm safety net in the United States. While there are several rationales to choose from, one of the most notable is that the agricultural policy aims to create a level playing field for U.S. agricultural producers in the global market. In this article we illustrate the case of rice.

Rice is an important part of the U.S. agricultural economy, particularly in the South, where a number of local communities rely heavily on the rice industry. Despite its importance, U.S. rice production accounted for only 1.2% of global rice production over the past five years. As a result, the price that U.S. producers receive is largely dependent on market and political dynamics originating in the rest of the world.

In April 2015, the US International Trade Commission (USITC) reported on the global competitiveness of the U.S. rice industry and concluded that the global rice market was “characterized by significant government intervention in both imports and exports.” One of the most notable serial offenders is India, which uses a range of input subsidies and minimum support prices to support its producers to the detriment of producers around the world. In 2020, our own analysis concluded that U.S. rice and wheat farmers suffered nearly $600 million in lost revenue per year (this figure increased to $850 million in 2022) due to the trade-distorting domestic support policies used by India US dollars per year). To update). In February 2024, Rep. Jason Smith, chairman of the House Ways and Means Committee, called on the USITC to re-examine the global competitiveness of U.S. rice producers. While we do not want to prejudge the outcome of their investigation, we cannot help but note that India's rice exports have more than doubled from 2015-16 (when the last USITC report was written) to 2021-22.

The bottom line is that producers in other markets have significant, government-sponsored advantages that give their rice producers an edge over U.S. rice producers. All of this explains why 2022/23 marked the lowest level of US rice exports since 1985/86 (Figure 1). While previous Southern Ag Today articles have explored the temporary relief provided by India's recent export ban (see Here And Here) the eventual return to the status quo will inevitably lead to lower prices for producers around the world, including in the United States.

All of this is another reminder of the importance of the agricultural safety net in leveling the playing field for America's agricultural producers. It also underscores the importance of updating the agricultural safety net in the next farm bill to ensure it reflects the risks America's agricultural producers currently face.

Figure 1. US rice exports from 1985/86 to 2022/23.

Source: Southern Ag Today, a collaboration of economists from 13 Southern universities.