Examining Economic Efficiency of U.S. Government Grading System: The Case of Louisiana Rough Rice

Abstract

This study estimates a hedonic price model for Louisiana rough rice to evaluate the USDA grading system. The parameter estimates suggest that chalky kernel and red rice are significant quality factors that affect prices in the bid/acceptance regional rough rice market. Results also show that head and broken rice are as important characteristic as the USDA grade quality factors. Generalized least-squares estimation indicates that the USDA grades do not fully explain the observed price variations in Louisiana rough rice. The study constructs a modified grading system for rice. Comparisons show that the modified grading system outperforms the current government grading.