Incorporation of rice straw is estimated to add $30 to $50 per acre to production costs, not including any yield losses from increases in stem rot disease. Yield losses from stem rot are difficult to estimate because of interactions among such factors as the rice variety, weather, and fertilization practices. Using an average yield of 70 hundred weight per acre and a price for paddy rice of $10 per hundred weight, losses from stem rot disease are estimated at $56 per acre. Based on these assumptions, farm income could be reduced by $86 to $106 per acre. Results are based on a limited number of farm observations.