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Tobacco buyout deadline looms
Virginia Business
June 2005
Price supports for the U.S. tobacco
industry will soon be history. A steady stream of tobacco
producers and quota owners have been showing up at local
Farm Service Agency offices to sign up for payments
that will effectively buy them out of the quota program
recently axed by Congress. The payment registration
process began in mid-March and runs through June 17.
By the end of April, more than 27,000 of 49,230 eligible
Virginia producers and quota holders — or 55 percent
— had already signed up.
The tobacco quota system, put in
place in 1938, was intended to limit supply, raise prices
and stabilize the market. Each quota gave a tobacco
grower the right to grow one pound of tobacco each year,
though over the years, many nongrowers purchased the
quotas and then leased them to growers. Through the
years, as foreign competition began to undercut U.S.
prices and the national quota was cut in half, farmers
began having a hard time making ends meet.
The buyout program will pay each
owner $7 per pound of their 2002 quota; tobacco producers
will receive the 2002 quota multiplied by $3 for each
pound they grew on their farms that year. The initial
buyout payment will be sent between June and September;
quota holders and producers have the option of receiving
one lump payment or payments spread out over 10 years.
The estimated total to be paid out
over 10 years to Virginia growers and quota holders
is $666.7 million, according to Kelly Tiller, an agricultural
economist at the University of Tennessee.
Jacquelin Easter, executive director
of the Virginia Farm Service Agency, said that her office
has been engaged in an intense publicity campaign, sending
letters, holding meetings, placing advertisements in
farming publications and talking to the media. “If
people don’t sign up, they won’t get paid,”
she explains. “And we’ve run across a few
people who are confused and are refusing to take the
buyout, but we’ve contacted those people to explain
that, once the buyout occurs, there will no longer be
a price support program.” |
