This report reflects analysis of projected gross returns under the proposed farm programs – H.R. 2646 the House Bill that passed the House floor on October 5th, the Senate Bill that passed the Senate Agriculture Committee on November 15th and the Cochran/Roberts Bill that was defeated previously in committee.Agricultural and Food Policy,

Anderson, David P.

Klose, Steven L.

Outlaw, Joe L.

Richardson, James W.

Womack, Abner W.

English

Research Papers in Economics

Analysis of the Effects of Proposed House and Senate Farm Bills 
on Rice Returns
AFPC Briefing Paper 01-13
(Revised)
James W. Richardson
Joe L. Outlaw
Steven L. Klose
David P. Anderson
Abner W. Womack
Agricultural and Food Policy Center
Department of Agricultural Economics
Texas Agricultural Experiment Station
Texas Cooperative Extension
Texas A&M University
December 2001
College Station, Texas 77843-2124
Telephone:  (979) 845-5913
Fax:  (979) 845-3140
Web Site:  http://www.afpc.tamu.edu/1 Estimates in this report have been modified relative to a report released at the St. Louis Rice Producers meeting held on Saturday
December 1, 2001.  An error was made in calculating total gross returns for the rice program under S. 1731.  The error, pertaining to the
updating of program yields, resulted in a much lower total return under S. 1731 and suggested substantially less support relative to the other two
programs.
By Monday December 3, this mistake was discovered and corrected.  On Tuesday, December 4 these corrections were sent directly
to staff members of Senator Harkin and Senator Cochran.  AFPC at Texas A&M bears the responsibility for this mistake and takes total
responsibility for making it.  We have changed our internal procedure to insure that this does not occur again.  We have also contacted staff
members directly to discuss the mistake and the corrected projections.
Analysis of the Effects of Proposed House and Senate Farm Bills 
on Rice Returns
1
Introduction
This report reflects analysis of projected gross returns under the proposed farm programs –
H.R. 2646 the House Bill that passed the House floor on October 5
th, the Senate Bill that passed
the Senate Agriculture Committee on November 15
th and the Cochran/Roberts Bill that was
defeated previously in committee.
Assumption tables are included that clearly reflect all parameters of these Bills at the time
this report was produced in early December.  As it is likely that the political process continues in
an interactive mode, it is important to note clearly the assumptions behind this reported analysis. 
Questions have come up as to how the savings account option under the Cochran/Roberts Bill
will be implemented.  If revisions are made and reported we will update the projected gross
returns at that time.
For the above reasons it is very important to carefully review program parameters as
reported in Table 1.  Returns are generated from their program parameters plus projected
program prices developed by FAPRI for H.R. 2646, S. 1731, and Cochran/Roberts.  
This analysis focuses on the expected gross return associated with the parameters of H.R.
2646 as passed by the House, Senate Bill S. 1731 passed by the Senate Agriculture Committee
and the Cochran/Roberts as reported to the Senate Ag Committee.
This is the second report by AFPC comparing these programs using a total gross return
analysis.  For those not familiar with this process the comparisons reflect the expected gross
return per unit of commodity should the program become law.  What does it require to do this
analysis?  The following sequence is important:
First: A clear understanding of program parameters that defines government support in
all areas.
Second: A reasonable set of estimates on expected market prices as this is the starting
point in determining loan deficiency payments and counter cyclical payments.  It
should be noted that market prices are taken from FAPRI.2
Third: Expected shifts in Base acres and changes in farm program yields corresponding
to the three programs’ provisions for optional updating are critical assumptions. 
Also included are the varying payment fractions.
Fourth: Expected receipts from the market and the various program provisions are added
to calculate a total expected gross return.  In general, returns come from four
areas:
# Market Price
# Loan Deficiency Payments
# Fixed Payments
# Counter Cyclical or as in the Cochran/Roberts proposal a Savings Account
Results
The House (H.R. 2646) and Senate (S. 1731 and Cochran/Roberts) proposals for the new
farm bill are similar in terms of the tools used to support producer incomes.  Each continue fixed
(AMTA) payments, marketing loans, allow for base updating, and two (H.R. 2646 and S. 1731)
initiate a new counter-cyclical program to support producer incomes when prices are low.  A
simulation model was developed by the Agricultural and Food Policy Center (AFPC) that allows
for comparison of projected rice returns and government costs under risk.  Table 1 contains the
specific assumptions used to model each proposal.
Table 2 contains a comparison of expected rice gross receipts under the three proposals for
the 2002 to 2006 period.  Total gross receipts under H.R. 2646 were highest over the period
followed by the Cochran/Roberts proposal and S. 1731.  FAPRI’s projected market prices would
likely be lowest under the Cochran/Roberts proposal and highest under S. 1731.
Commodity prices projected by FAPRI are somewhat above current market levels. 
However, since each proposal contains a counter-cyclical component, the relative gross receipts
would be unchanged if lower prices had been projected.  Several price levels were analyzed and
the relative performance of gross receipts was the same across the three Farm Bill proposals.
The relative performance of the three proposals across commodities is indicated in Table 3. 
All commodities other than cotton, barley and soybeans would have higher average gross receipts
per unit of production over the 2002-2006 period under H.R. 2646.  S. 1731 generates the highest
receipts for cotton, barley and soybeans.
This analysis conducted by AFPC indicates that H.R. 2646 provides more income support
for the rice industry than either of the other two proposals.  The Cochran/Roberts proposal
provides the next highest level of income support followed by S. 1731.Table 1. Assumptions Behind the Gross Receipts/Unit of Production Analysis for H.R. 2646, S. 1731, and Cochran/Roberts Amendment.
H.R. 2646 S. 1731 Cochran/Roberts
2002-2006 2002-2006 2003 2004 2005 2006 2002-2006
Loan Rates
Wheat ($/bu.) 2.5800 3.0000 2.5800
Corn ($/bu.) 1.8900 2.0800 1.8900
GS ($/bu.) 1.8900 2.0800 1.8900
Barley ($/bu.) 1.6500 2.0000 1.6500
Oats ($/bu.) 1.2100 1.5000 1.2100
Cotton ($/lb.) 0.5192 0.5500 0.5192
Rice ($/cwt.) 6.5000 6.8500 6.5000
Soybeans ($/bu.) 4.9200 5.2000 4.9200
Target Prices
Wheat ($/bu.) 4.0400 3.4500 0.0000
Corn ($/bu.) 2.7800 2.3500 0.0000
GS ($/bu.) 2.6400 2.3500 0.0000
Barley ($/bu.) 2.3900 2.2000 0.0000
Oats ($/bu.) 1.4700 1.5500 0.0000
Cotton ($/lb.) 0.7360 0.6800 0.0000
Rice ($/cwt.) 10.8200 9.3000 0.0000
Soybeans ($/bu.) 5.8600 5.7500 0.0000
Fraction Fix Pay Rate 0.85 1.00 0.85
Fixed Payment Rates
Wheat ($/bu.) 0.5300 0.4500 0.4500 0.2250 0.2250 0.1130 0.7292
Corn ($/bu.) 0.3000 0.2700 0.2700 0.1350 0.1350 0.0680 0.4128
GS ($/bu.) 0.3600 0.3100 0.2700 0.1350 0.1350 0.0680 0.4953
Barley ($/bu.) 0.2500 0.2000 0.2000 0.1000 0.1000 0.0500 0.3440
Oats ($/bu.) 0.0250 0.0500 0.0500 0.0250 0.0250 0.0130 0.0344
Cotton ($/lb.) 0.0667 0.1300 0.1300 0.0650 0.0650 0.0325 0.1418
Rice ($/cwt.) 2.3500 2.4500 2.4500 1.2250 1.2250 0.6125 3.2300
Soybeans ($/bu.) 0.4200 0.5500 0.5500 0.2750 0.2750 0.1380 0.5779
Wheat (m. acre) 78.40 70.40 78.40
Corn (m. acre) 81.50 78.90 81.50
GS (m. acre) 13.60 10.60 13.60
Barley (m. acre) 11.10 8.40 11.10
Oats (m. acre) 6.70 4.50 6.70
Cotton (m. acre) 16.44 16.80 16.44
Rice (m. acre) 4.17 4.00 4.17
Soybeans (m. acre) 74.00 73.40 74.72
Program Yields
Wheat (bu./acre) 34.50 43.00 34.50
Corn (bu./acre) 102.60 140.20 102.60
GS (bu./acre) 56.90 67.80 56.90
Barley (bu./acre) 46.70 54.70 46.70
Oats (bu./acre) 50.70 62.50 50.70
Cotton (lb./acre) 600.00 654.70 600.00
Rice (cwt./acre) 48.17 55.00 48.17
Soybeans (bu./acre) 38.28 40.30 38.83
Farm Savings Account None None Yes
Cap in 2002 $600,000,000
Cap in 2003 $800,000,000
Cap in 2004 $1,000,000,000
Cap in 2005 $1,200,000,000
Cap in 2006 $1,200,000,000
December 5, 2001 1:05 p.m.Table 2.  Comparison of Returns per Unit of Production for Rice Across Three Farm Bill
            Options: H.R. 2646, S. 1731, and Cochran/Roberts Amendment, 2002-06.
2002 2003 2004 2005 2006
($/cwt.)
H.R. 2646
Market 6.494 6.907 6.977 7.200 7.358
LDP 2.214 1.942 1.895 1.748 1.644
Fixed Payment 1.964 1.955 1.943 1.931 1.925
CCP 1.363 1.136 1.105 0.940 0.861
Gross Receipts 12.035 11.940 11.921 11.818 11.788
S. 1731
Market 6.454 6.871 6.937 7.148 7.301
LDP 2.591 2.315 2.272 2.132 2.032
Fixed Payment 2.600 2.603 1.294 1.285 0.641
CCP 0.000 0.000 0.918 0.772 1.261
Gross Receipts 11.644 11.789 11.420 11.337 11.234
Cochran/Roberts
Market 6.494 6.907 6.977 7.200 7.358
LDP 2.214 1.942 1.895 1.748 1.644
Fixed Payment 2.660 2.663 2.647 2.630 2.622
Savings Acct. 0.021 0.029 0.036 0.045 0.045
Gross Receipts 11.390 11.541 11.556 11.622 11.669
December 5, 2001 1:05 p.m.Table 3. Comparison of Gross Receipts per Unit of Production for Three Farm Program Options:
H.R. 2646, S. 1731, and Cochran/Roberts Amendment, 2002-2006.
Commodity 2002 2003 2004 2005 2006 Average 
Rice ($/cwt.)
HR 2646 12.04 11.94 11.92 11.82 11.79 11.90
S 1731 11.64 11.79 11.42 11.34 11.23 11.49
C/R 11.39 11.54 11.56 11.62 11.67 11.56
Cotton ($/lb.)
HR 2646 0.783 0.782 0.779 0.776 0.771 0.778
S 1731 0.806 0.806 0.778 0.776 0.765 0.786
C/R 0.753 0.753 0.755 0.758 0.758 0.756
Wheat ($/bu.)
HR 2646 4.17 4.14 4.11 4.08 4.08 4.11
S 1731 3.96 3.97 3.87 3.86 3.79 3.89
C/R 3.77 3.84 3.87 3.92 3.99 3.88
Corn ($/bu.)
HR 2646 2.68 2.69 2.68 2.69 2.70 2.69
S 1731 2.62 2.63 2.57 2.60 2.58 2.60
C/R 2.50 2.52 2.53 2.57 2.62 2.55
Sorghum ($/bu.)
HR 2646 2.86 2.86 2.85 2.86 2.84 2.85
S 1731 2.55 2.52 2.50 2.52 2.50 2.52
C/R 2.65 2.67 2.68 2.72 2.75 2.70
Barley ($/bu.)
HR 2646 2.82 2.84 2.84 2.84 2.86 2.84
S 1731 2.96 2.96 2.87 2.88 2.84 2.90
C/R 2.83 2.85 2.86 2.89 2.92 2.87
Oats ($/bu.)
HR 2646 1.81 1.83 1.84 1.85 1.83 1.83
S 1731 1.76 1.77 1.77 1.78 1.78 1.77
C/R 1.48 1.50 1.51 1.53 1.55 1.51
Soybeans ($/bu.)
HR 2646 5.89 5.91 5.93 5.97 5.99 5.94
S 1731 6.02 6.05 6.01 6.04 6.02 6.03
C/R 5.72 5.77 5.84 5.91 5.96 5.84
December 5, 2001 1:05 p.m.

Analysis of the Effects of Proposed House and Senate Farm Bills on Rice Returns

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