An Examination of U.S. Rice Export Promotion Programs

The United States Department of Agricultures Foreign Agricultural Service (USDA/FAS) administers two primary promotion programs for rice exports: the Foreign Market Development Program (FMDP) and the Market Access Program (MAP). Based on the literature, a single equation framework is specified to estimate the rice import demand model. Three major U.S. rice importing countries are selected: Mexico, Costa Rica, and Honduras. Single equation analysis methods are applied. The effectiveness of the two programs for rice exports to the Latin American markets is evaluated.Promotion programs and the competitors exchange rate as primary explanatory variables for the U.S. rice import demand in the targeted markets are evaluated. The results show that promotion programs are effective in Mexico and Honduras, with an average return of $10 and $40 per dollar during 1989-2003. However, promotion programs were not significant for Costa Rica. Estimated own price elasticities are considerably less elastic in the Mexico and Honduras market than in the Costa Rica market. The exchange rate fluctuation of two primary rice competitors, Uruguay and Argentina, show a significant effect to the market demand for U.S. rice.