Ag economist aims to help farmers with bottom line

Frances Gould, Schultz, Bruce  |  10/16/2013 9:23:33 PM

Student workers at the LSU AgCenter’s Rice Research Station use a sheet of plywood to flatten rice plants. The purpose was to simulate lodged rice for a study being conducted by LSU AgCenter agricultural economist Dr. Mike Salassi.

The work of LSU AgCenter agricultural economist Dr. Mike Salassi is aimed at helping farmers with decisions that directly affect their bottom lines.

His work is used to help analyze and formulate national farm bill provisions related to rice.

Salassi said he uses state farm data to estimate a benchmark for the projected costs of growing a rice crop, as well as the annual projected returns, and that information is used when a new farm bill is drawn up.

"It is important for policymakers to have current and accurate estimates of commodity production costs," Salassi stressed. "That’s one of the major reasons we do those calculations each year – in addition to them being used by local farmers and lenders in Louisiana."

Salassi said he starts examining proposals for programs in the farm bill even before Congress votes on the measure.

"I work closely with the rice industry in the state to evaluate farm bill proposals as they are made during congressional debate," he said. "That way, we can know what the effect of a specific proposal will be on the rice production sector before it is voted on in Congress."

Once a bill passes Congress, Salassi reviews any new programs to determine what effects those will have on Louisiana commodities, including rice.

The current farm bill expires in 2012, and committee field hearings have been held on the new bill. Salassi said Congress is not expected to begin debate until after Jan. 1.

The LSU AgCenter economist said one of the decisions to be made in the next farm bill will involve current direct or fixed payments for rice farmers.

"Direct payments are critical to a crop like rice, which has relatively high production costs as well as extreme market price variation," Salassi explained. "With half of our crop exported, foreign markets have a tremendous effect on domestic rice prices. Direct payments in the current farm bill help rice growers combat this high degree of price risk."

Salassi has been reviewing a wide range of issues that could affect rice farmers’ wallets.

He has concluded a study of land rental arrangements, and he said some landowners recently have proposed receiving lower "net" shares of the crop and not sharing in any production expenses. Salassi said that often does not work to a farmer’s benefit because it shifts more of the production and price risk to the grower.

Salassi also has been studying the cost of growing hybrid rice compared to growing conventional rice. Hybrids are grown on about 25 percent of Louisiana’s total rice acreage.

Growing hybrids is more expensive – primarily because of the higher price for seed, which is roughly $70 to $90 more per acre than conventional seed. That means a much higher yield is required to overcome the expense, he said.

At harvest, hybrids, in studies to date, have shown somewhat lower milling quality, which affects the rough rice market price received. Salassi said farmers must yield an additional 500 to 1,300 pounds per acre of hybrids to recover the higher costs, depending on crop tenure arrangements and ratoon crop production options.

The LSU AgCenter economist also initiated a study in 2010 to estimate the milling quality of lodged rice and its resulting effect on market price. He said this is an important crop insurance issue for rice and that there is no current research data available about the effect of lodged rice on milling yield and grade.

Salassi said samples from downed rice from the 2010 crop have been analyzed for milling quality losses.

Harvesting downed rice is more expensive because combines have to be run slower to pick up the lodged crop, which means more diesel is burned in the process, and his study shows the increased harvest costs can range from $6 to $57 per acre, depending on combine harvest speed.

Yield loss of downed rice can range from $60 to $864 per acre, he determined, depending on the prices and the extent of loss.

"I would like to do a two-year study on this issue, including rice variety and location in the analysis," Salassi said. "This year was just a preliminary evaluation."

(This article was published in the 2011 Louisiana Rice Research Board Annual Report.)

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