Government Support Needs to Be Reassessed
RCED-94-88, May 26, 1994
Pursuant to a congressional request, GAO reviewed the Department of Agriculture's (USDA) rice program, focusing on its impact on the federal government and rice buyers and producers.
GAO found that: (1) the rice program is costly despite USDA attempts to curtail costs; (2) between 1986 and 1992, annual government support costs averaged $863 million and annual export promotion costs averaged $157 million; (3) the rice program increased buyers' expenditures by an average of $12 million annually; (4) the rice program's costs are greater than its benefits because USDA has kept some land from productive use; (5) rice producers' incomes from program payments increased from 27 percent in 1984 to 50 percent in 1992; (6) without the program, some rice producers would have gone out of business; (7) the rice program had the highest participation rate of any commodity program, with 96 percent of all rice acres enrolled in 1992; (8) although Congress has attempted to limit payments under the rice program, producers have reorganized their farm operations so that they can receive multiple payments; (9) in 1992, 15 percent of the rice farms received 52 percent of USDA deficiency payments; (10) despite federal efforts to promote rice exports, the U.S. world market share declined from 24 percent in 1980 to 15 percent in 1992, and the volume of rice exported declined 14 percent; and (11) the reasons for the decline in the world market share include the improved quality of foreign rice, increased price competitiveness, foreign governments' increased protection of their domestic markets, increased domestic consumption, and the rice program's supply restrictions.
- Closed - implemented
- Closed - not implemented
Matters for Congressional Consideration
Matter: With the anticipated reauthorization of the farm bill in 1995 and the opportunities provided by the General Agreement on Tariffs and Trade and the North American Free Trade Agreement, Congress may wish to consider ways to move rice producers toward greater market orientation and reduce their dependency on government support. For example, Congress could reduce government costs by lowering the target price, incorporating marketing loan gains into the calculation of deficiency payments, eliminating the 50/85 program, and reducing export assistance.
Status: Closed - Implemented
Comments: Through the 1996 Farm Bill, the 104th Congress removed the link between rice deficiency payments and prices and provided farmers with a fixed-contract payment for 7 years. The farm bill also provides farmers with much greater flexibility to produce to the dictates of the marketplace and eliminates annual acreage reduction programs. These changes are expected to help move rice producers to a greater market orientation.
Matter: Because this approach could have a substantial impact on some producers, Congress may wish to consider options to give producers time to make adjustments in their investment decisions. Congress could, for example, phase out payments to producers over a number of years.
Status: Closed - Implemented
Comments: The 1996 Farm Bill provides 7-year declining market transition payments to rice producers to help them transition to a greater reliance on the market place, rather than on government subsidies, in making their production decisions.