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Tobacco Buy-Out  
 
For North Carolinians, the Tobacco Quota Buyout is one of the most significant legislative accomplishments in recent years. The bill H.R. 4520 (Public Law 108-357) assesses tobacco companies each year in order to provide a buyout of $7 per pound for quota holders and $3 per pound for growers. In the First Congressional District, there were 1,040 farms growing 35,147 acres of tobacco according to the 2002 census of agriculture. This buyout will bring over $600 million to the First District and $4 billion statewide.

Who Qualifies

Tobacco Quota Holder Contract Payment

  • Eligibility: must be an owner of a farm for which a basic marketing quota or allotment was established for the 2004 tobacco marketing year
  • Application: quota holder must provide applicable information to the secretary of Agriculture
  • Calculation of contact payments for quota holders with quotas other than poundage quotas: Basic quota or allotment for the 2002 marketing year owned by the tobacco quota holder multiplied by the average production yield per acre for the period covering the 2001, 2002, and 2003 crop years for that kind of tobacco. This number is then multiplied by $7 per pound.
  • Contact Payments are paid out annually over 2005 – 2014 (10 percent compensation per year)
  • Provides the secretary the authority to intervene in certain disputes regarding distribution of tobacco quota holder contract payments and provides for the assignment of contract payments in the event of the death of a tobacco quota holder.

Contract payments for Producers of Quota Tobacco

  • Eligibility: must be an owner, operator, landlord, tenant, or sharecropper that shared in the risk of producing tobacco on a farm where tobacco was produced or considered planted
  • Application: producer must provide applicable information to the Secretary of Agriculture
  • Calculation of flue-cured and burley tobacco contract payments: effective tobacco quota for the 2002 marketing year multiplied by variable rate per pound
  • Calculation of contract payments for other kinds of tobacco: Basic tobacco or allotment for the 2002 marketing year multiplied by the average annual yield per acre of quota of quota tobacco produced on the farm for the period covering the 2001, 2002, and 2003 crop years for that kind of tobacco. This number is then multiplied by variable rate per pound.
  • Variable payment rate for contract payments:  The payment rate varies based on how many years of the following the producers marketed or considered planted tobacco:  2002, 2003, or 2003.  If all three years, the producer receives the full payment rate of $3/pound; if 2 of the 3 years, the producer receives the payment rate of $2/pound;  if 1 of 3 years, the producer receives the payment rate of $1/pound.
  • Contact Payments are paid out annually over 2005–2014 (10 percent compensation per year)
  • Provides for the equitable distribution of contract payments if two or more persons are a producer of the same quota tobacco and provides for the assignment of contract payments in the death of a tobacco quota holder.

Phase II Payments
Tobacco companies have filed to recover the funds they have paid which would be disbursed to farmers as their December 2004 phase II payments. The buyout replaces Phase II, although the issue has been the subject of a legal dispute. Companies contend that the buyout eliminates their obligation for the December 2004 phase II payment. Farmers contend that the buyout does not begin assessing companies until 2005, meaning that farmers may be entitled to the December 2004 Phase II money. This issue must still be resolved and I will continue to carefully monitor it as events develop.