Iowa Public Television


Tobacco Buyout Begins This Summer

posted on April 8, 2005

The Chinese response was what one might expect. The country's Ministry of Commerce angrily protested efforts by both the U.S. and European Union to stem the tide of textile imports ... and warned such moves could damage world trade. The Chinese pointed out they've already imposed a domestic tax to try and restrain textile exports and objected to what they called backpedaling on trade liberalization efforts.

U.S. government efforts for another staple of the South ... the tobacco industry ... have gone more smoothly. Efforts to end the decades-old and arcane quota system under which tobacco subsidies were paid went into high gear this week with the delivery of the first payments under the so-called tobacco buyout program.


Tobacco Buyout Begins This Summer

Beginning this summer, tobacco producers and quota holders (which includes landowners who rented out their property to tobacco growers) will receive their first of ten annual government "buyout" payments.

The $10.1 Billion dollar Tobacco Transition Payment Program -- more commonly called the "buyout"--was established because Congress last year ended a Depression-era program that set price and production controls on U.S. tobacco. Most tobacco will soon be grown under contract to end-users, such as tobacco companies.

While an estimated $500 (M) million dollars of the buyout money will go to tobacco organizations helping to administer the tobacco program ... the USDA's Farm Service Agency estimates that $9.6 (B) billion dollars will go to about 500,000 quota holders and producers. Quota holders will receive $7 per pound of tobacco based upon their basic quota at the 2002 marketing year. Producers of quota tobacco will receive up to $3 per pound payment based on their share of the risk.

The tobacco bill was fought over for eight years and finally became law last October, when President Bush signed the American Jobs Creation Act of 2004. The law included "the Fair and Equitable Tobacco Reform Act," which established the Tobacco Transition Payment Program.


Tags: agriculture news smoking tobacco