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More information on California Rice and the PLC

More information on California Rice and the PLC

Noted attorney Tim Kelleher has additional insight on the impact of the PLC for California’s Temperate Japonica Rice.

He provides the following information on this important subject:


TEMPERATE JAPONICA RICE

Many of you attended the two growers’ meetings recently held in Yuba City and Colusa. I explained how FSA payments would be calculated under the two programs: PLC and ARC. I thanked the Association and our federal government relations firm for their hard work in establishing California’s medium and short grain rice as a separate class of rice: Temperate Japonica Rice. This definition was developed by Kent McKenzie, head of the Rice Experiment Station. Without this class California production would have been included in the nationwide class of medium/short grain rice. I stated that this was very valuable, but didn’t have any numbers as to its actual value.

California in 2015 had 639,374,093 medium/short grain base acres. The other rice producing states had 20,771 base acres. Southern medium grain rice’s Marketing Year Average Price has historically been about $4.00 less than California’s Temperate Japonica’s MYAP.   In 2015 the spread was $6.90. Reflecting, but only partially, this price spread, Temperate Japonica rice’s reference price was set is $16.10, compared to $14.00 for medium/short grain rice. Given USDA’s current price projection for the 2016 crop of $13.50, the PLC payment rate is based on $16.10 – $13.50 = $2.60. If California rice were lumped in with medium/short grain and the reference price was $14.00, assuming 85% of medium/short grain production is in California, the weighted average projected price would be about $14.23. The PLC payment rate would be $14.00 – $12.93 = $1.07, or $1.57 less than $2.60. If the PLC yield is 75 cwt/A, this is $77.25/Acre less than for Temperate Japonica rice. Applying the 85% factor, the difference is $65.66. That per base acre difference multiplied by 450,000 acres (guess of total rice base acres participating in PLC program) equals $29,547,000 in California PLC payments because of the separate category for Temperate Japonica rice. Thank you CRC, The Russell Group and Kent McKenzie.

The separate category for California rice has little effect on ARC payments. Yield variations are based on either county or individual yields. These variations are small in California, especially when averaged. The primary driver of ARC payments is price. In the years that are included in determining payments, California rice prices vary more than southern medium/short grain. Comparing yield variations of just Temperate Japonica with a weighted combination of southern medium/short grain and Temperate Japonica price shows little difference in percentage change, which is what ARC measures to compute payments.

Tim Kelleher
Rice Lawyers, Inc.

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