Economy
Economic Impact

The Economic Contributions of the California Rice Industry

Published September 2003
By Daniel A. Sumner and Henrich Brunke*

The California rice industry has played an important part in the economy of northern California for generations. The bulk of the California crop is grown in the Sacramento Valley where abundant water from nearby snow capped mountains and several rivers, as well as ideal soil and growing conditions combine to make rice the dominant crop in the region. This brief discussion highlights key economic facts and figures about the industry and places those in the context of its economy wide contributions.

Economic Overview

In 2002 there were about 528 harvest acres of rice in California, up from 471 in 2001. California produced about 42.9 million hundredweight of rice in 2002 up from about 38.5 million hundredweight in 2001. Harvested area rose by about 12 percent in 2002 and with only a slight decline in average yield, production rose by about 11.5 percent. With a decline in market price of approximately five percent, the market value of production rose by about six percent. The farm value of production rose from about $203 million in 2001 to $215 million in 2002 (see table 1).

The federal government rice program in the United States provided revenue to the rice industry in addition to what is available directly from market sources. Under the Farm Security and Rural Investment Act of 2002, payments to rice farmers are from three main sources. First the direct payment program provides a payment based on a history of rice production on the farm that is independent of current rice prices or output. Second, the counter-cyclical payment program provides a payment on a history of rice production, but this payment depends on the national average price of rice and is smaller when the rice price is higher. Finally, the marketing loan program provides benefits per unit of rice production that rise when the market price falls. Given, low rice prices in 2001 and 2002, the payments added significantly to the total revenue of the rice industry in both years.

Total revenue of the California rice industry was almost $500 million per year in both 2001 and 2002 (see table 1). Total revenue was thus somewhat less than $10 per hundredweight. This is the income that supported the production costs, infrastructure and rice land prices in industry. This is also the revenue that forms the basis for the industry's contributions to the rural economies of Northern California.

The cost side of the net revenue equation indicates how total industry revenue was distributed. According to the cost of production data compiled by University of California Cooperative Extension the typical cultural costs for rice, including field preparation, seeding, fertilizing, irrigation and pest control are about $380 per acre. Harvest, drying, storage, post harvest costs and interest, including straw management add another $219 per acre. Costs associated with owned or rented crop land add $225 per acre. The UC estimated the typical full costs are $944 per acre. Land was the largest single cost item and indicates the capitalized value of net future returns that growers anticipate from producing rice. Hired and family farm labor is another major cost item.

Table 1: California Rice Production and Revenue Overview
Acreage harvested (Thousand acres) 471 528
Yield per acre (Hundredweight) 81.7 81.4
Production (Thousand hundredweight) 38.5 42.9
Price ($/hundredweight) 5.26 5.00
Market value of production (Million dollars) 203.2 214.9
Value of government payments (Million dollars) 288.7 269.5
Total revenue (Million dollars) 491.9 484.4

Sources: USDA, National Agricultural Statistics Service and Farm Service Agency

Rice is particularly important in six counties of the Sacramento Valley. The top six rice-producing counties are Colusa, Butte, Sutter, Glenn, Yuba and Yolo. Together these six counties produce about 94 percent of the California total. Rice is the number one agricultural commodity measured by market value of production in Butte, Colusa, Glenn, Sutter, and Yuba counties. It is also an important crop in Yolo County and is the number 2 slightly behind processing tomatoes in total revenue, including government payments.

Contributions of Rice to The Economy of Northern California

Rice production does not simply add rice revenue to the economy. That revenue is multiplied as the economic activity of rice growers and others spreads through the local, state and national economies (see the Measure of California Agriculture, University of California Agricultural Issues Center). Additional revenue for other businesses and additional employment in rural communities follows from economic activity initiated in the rice industry. In addition, this economic activity and the added land values contribute to tax revenue that is used for rural schooling and other local and state services. The local "multiplier" impacts indicate that about $1.60 dollars are added in county economic activity for each dollar of rice revenue in the counties of the Sacramento Valley. The impacts are larger than 1.6 in Butte, Sutter and Yolo counties where there is more non-farm business that relies on rice. The effect is largest, approaching 2.0 in Sacramento County. Employment multipliers show that each million dollars of rice revenue generates approximately 10 jobs in the local county. The largest impact is in Butte County with about 13 jobs per million dollars of rice total revenue. Overall we can associate about 5,000 rural community jobs in the Sacramento Valley with the California rice industry. This employment is crucial in these communities, which have a relatively small economic base and higher than average unemployment rates.

The Role of California Rice in the Nation and World

California is the second most important rice state in the United States producing about 20 percent of the nation's crop in a typical year. Most of the world's rice is grown in Asia, with China and India producing more than half of world production and Indonesia, Bangladesh, Vietnam and Thailand contributing another quarter. Despite being a relatively small producer of rice, the United States and California, have long been important exporters of rice. This is especially true of California, which mainly produces high-quality, medium grain japonica rice that is favored in Northeast Asia and in parts of the Middle East and Mediterranean region.

In 2001, California shipped about 49 percent of its rice to export markets. That share dropped to 43 percent in 2002 as export remained constant while production jumped. Rice exports were valued at $166 million in 2001 and valued at $183 million in 2002 where these are measured in terms of the declared f.o.b. port values. Rice ranks as the 9th most important export commodity in California agriculture, just behind walnuts and ahead of beef and beef products.

Japan receives about half the California export total, with California supplying about half of Japan's imports. In 2002, Turkey and Jordan (together) received about 15 percent of California exports and Taiwan took another 13 percent. Uzbekistan and South Korea rounded out the top 5 destinations, which accounted for 95 percent of California rice exports. This list of export destinations illustrates the importance of rice market trade liberalization to the California rice industry. Japan, South Korea and Taiwan are relatively new markets opened by specific World Trade Organization agreements in the past decade.

Final Remarks

The California rice industry contributes importantly to the economic activities of Northern California and especially in the Sacramento Valley. The influence of the industry spreads beyond the farm to all aspects of local economic life. The rice industry is a source of economic vitality and employment in rural areas where such contributions are particularly welcome.

California rice also plays a major role in the national and global rice economy. California is the number-two rice state in the United States and the sole producer of high quality medium grain japonica rice favored by many consumers. Rice is a major export commodity for California and California is a major rice exporter. Buyers in Northeast Asia and the Mediterranean region rely on California rice and these markets are growing with more open trade rules.