Evaluating Rice Rental Arrangements Under the Price Loss Coverage Program

The Rice Rental Arrangement Net Return Evaluation Model is a spreadsheet-based decision tool developed to assist Louisiana rice producers in evaluating the impacts of alternative crop land rental arrangements on projected net returns above specified rice production costs from the perspective of both the rice producer and the land owner. This decision aid model includes the Price Loss Coverage (PLC) Program option of the Agricultural Act of 2014 (2014 Farm Bill). The PLC Program is expected to be the farm income support option selected by a majority of rice producers and landowners in the state. With the major changes which have been implemented in the 2014 Farm Bill, crop land rental arrangements would be expected to adjust to reflect this change in rice income expectation. This purpose of this decision aid is to assist rice producers and landowners in evaluating alternative rice rental arrangements and to estimate the impact on expected net returns above specified rice production expenses for both the tenant rice producer and the land owner.

The Price Loss Coverage (PLC) Program provides for market price protection only and operates similar to a target price type of program. The PLC rice reference price is $14.00 per cwt., entered in cell G22. A value for an updated rice program yield (90% of the 2008-2012 farm rice yield) is entered in cell G23 in pounds per acre. This spreadsheet decision tool calculates net returns on a per-planted acre of rice basis. Therefore, the number of acres of rice planted on this tract (cell G24) and the number of total rice base acres on this tract (cell G25) are entered to estimate any PLC payments per planted rice acre. The PLC program pays on 85% of rice base acres.

This decision aid can evaluate cash and crop share leases for rice production. Rice crop share percentage paid to the landlord (for land and/or water) can be entered as a percentage value in cell F12. Alternatively, a rice cash lease amount can be entered in cell F13 in dollars per acre. An expected farm level rice market price is entered in cell F8 (in dollars per cwt.) and an expected farm level rough rice yield is entered in cell F9 (in pounds per acre, dry yield basis). For purposes of calculating a PLC Program payment, an expected national Marketing Year Average (MYA) rough rice price is entered in cell F10. These price and yield values are then used as the midpoints of a rice price and yield range over which net returns above specified production expenses are calculated.

There is an option to enter per unit values for rice drying and hauling charges (in dollars per cwt.), in cells F18 and F19, which would be charged to the producer and landowner in the same share percentages as the crop share. Alternatively, zeros can be entered in cells F18 and F19 and a per acre charge for drying and/or hauling costs can be entered in the production cost table along with a value for the percent of this cost paid by the landowner, in a similar fashion as the other rice production costs are entered.

This Excel spreadsheet decision tool can be downloaded from the LSU AgCenter Rice Economics web page, and can be saved and used on any desktop or laptop personal computer. The web address for the LSU AgCenter is: www.lsuagcenter.com. A copy of this user’s guide along with the spreadsheet decision aid Excel file can also be obtained by contacting the authors by email at mdeliberto@agcenter.lsu.edu.

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1/7/2019 4:26:31 PM
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