Farm Bureau Policy Development Fact Sheet No. 6 — 2012 RICE PROBLEMS AND ISSUES RICE FUTURES CONTRACT The futures market is used by farmers as a means for price discovery and risk management. However, in recent years, increased volatility in futures markets and a lack of convergence between futures and cash prices for rice have caused concern in the rice industry, at the exchange, and within government regulatory agencies. The CMG Group and the Commodity Futures Trading Commission (CFTC) began meeting with the rice industry late last year to discuss possible changes to the rice contract that might improve the performance of the contract. The CMG Group and CFTC have a goal of improving convergence between the cash and futures market for rice. This summer the CMG Group announced that, pending CFTC approval, the storage charge that approved regular rice warehouses may charge holders of outstanding warehouse receipts will be increased. The current charge of 10 cents per hundredweight will be increased to 12.5-cents per hundredweight starting Sept. 18, 2012. Additional changes to the contract are possible in the future, including expanding the delivery territory and changing the delivery instrument. Related Policy: Commodity Futures and Options N-221 1. 2.
What factors should be considered before additional changes are made to the rice futures contract? What changes to the rice futures contract, if any, do you support?
HERBICIDE DRIFT ISSUES In 2012, the Arkansas State Plant Board voted to temporarily change the regulations regarding the use of 2,4-D containing pesticides in two counties in Northeast Arkansas. Farmers in Cross and Poinsett counties located west of Crowley’s Ridge, are allowed to spray 2,4-D on rice levees under specific conditions without obtaining a permit. All other portions of the regulation must be followed, including record keeping. The permanent regulations state that producers in 10 counties in Northeast Arkansas cannot apply 2,4-D between April 15 - September 15 without a permit due to the potential for damage to the cotton crop. Related Policy: Cotton 103, Rice 105, State Plant Board 137, Chemicals 143 1. 2.
Have the strict 2,4-D rules in Northeast Arkansas helped improve drift issues? Should counties where distinct cropping divisions exist (like Crowley’s Ridge) have different regulations?
FARM PROGRAMS/CROP INSURANCE The U.S. Senate passed their version of the new farm bill on June 21, 2012. The bill eliminates direct payments, counter-cyclical payments, and Average Crop Revenue Election. The bill creates a new Average Risk Coverage (ARC) program which covers planted acres for qualifying crops, including both long and medium grain rice. Producers can choose to receive either individual coverage or county coverage, and payments would be made when the actual crop revenue for the year is less than the ARC guarantee of 89 percent of the benchmark revenue. The bill calls for a separate guarantee for irrigated and non-irrigated crops. The payment rate equals the lesser of the amount that the ARC guarantee exceeds the actual crop revenue for the crop year or 10 percent of the benchmark revenue for the crop of the covered commodity. The ARC payment rate will be multiplied by a lower rate for those who selected individual coverage: 60 percent for planted acres and 45 percent for prevented planted acres. For county coverage, payments would be made on 75 percent of planted acres and 45 percent of prevented plantings. The total amount of payments under ARC may not exceed $50 thousand, but both qualified spouses on a farm can be eligible. Producers would not be eligible for commodity programs if their adjusted gross income over the three taxable years preceding the actual program year exceeds $900 thousand, including both farm and non-farm income. The Marketing Loan Program was included, but loan rates were unchanged, leaving both long and medium grain rice at $6.50 per hundredweight. The bill also includes a Supplemental Coverage Option (SCO). Program and specialty crop producers could purchase a revenue policy on top of their individual crop insurance coverage to cover all or part of their deductible portion of their individual insurance policy. Coverage would be triggered only if losses exceed 10 percent. A minimum of 70 percent of the premium would be subsidized by the Federal Crop Insurance Corporation. The House version of the bill is not finalized at this writing. Related Policy: Risk Management/Crop Insurance N-225, National Farm Policy N-239 1. 2. 3.
Does the Senate version of the farm bill provide an adequate safety net for rice farmers? What changes need to be made to the bill to protect rice farmers and maintain a healthy rice industry in Arkansas? Should farmers who irrigate be able to directly receive the money that would pay for insurance premiums under the SCO to “self-insure� and cover the cost of irrigation?
RESEARCH AND EXTENSION Farm Bureau's policy development efforts offer producers an excellent opportunity to provide input into research and promotion programs. Farm Bureau has three representatives on the Arkansas Rice Research and Promotion Board. It is their responsibility to accurately represent the needs of Farm Bureau members. Therefore, Farm Bureau policy should reflect your specific needs and priorities for rice research and Extension. Related Policy: Rice 105, Rice research 106, Research and Extension 134 1.
What specific research and Extension programs are most needed for rice producers in Arkansas?
[If you need additional information on these and other issues concerning the rice industry or if you desire assistance with your county policy development meeting, contact Brandy Carroll, Rice Division Coordinator at 501-228-1268 or via e-mail at brandy.carroll@arfb.com.]