The deadline to sign up for the tobacco buyout is fast approaching. Tobacco producers and quota holders have until June 17 to sign up for payments at their local USDA Farm Service Agency offices.
“Sign-up is important for quota holders and producers so they can enroll in the new tobacco program before June 17, 2005, and be eligible to receive the first of 10 possible payments,” said Secretary of Agriculture Mike Johanns. “I encourage all quota holders and producers to contact their local USDA Service Centers to make an appointment to sign up as soon as possible.”
The Tobacco Transition Payment Program (TTPP) makes payments to tobacco quota holders and producers beginning in 2005 and ending in 2014 to help with the transition to the free marketplace. Eligible tobacco quota holders will receive $7 per pound based upon their basic quota at the 2002 marketing year level. Producers of quota tobacco will receive up to $3 per pound payment based on their share of the risk in the 2002, 2003, and 2004 crops of quota tobacco. TTPP payments will be made between June and September 2005 for Fiscal Year (FY) 2005. Subsequent payments in future years will be issued annually during the month of January.
A quota holder or tobacco producer may receive a lump-sum payment from a third party through a successor-in-interest contract or an assignment of payment. The consideration received must be equal to or greater than the discounted value of the payments, based on the discount rate established by USDA's Commodity Credit Corporation (CCC). The discount rate is determined by adding 2 percentage points to the prime lending rate on the first business day of the month, rounded to the nearest whole number. A tobacco lump-sum calculator is available on the FSA Web site at: www.fsa.usda.gov/tobacco. By inputting a few numbers, the user can tell if the lump-sum offer meets statutory guidelines.
The TTPP marks the end of the federal tobacco marketing quota and price support loan programs. Beginning with the 2005 tobacco crop, there will be no planting restrictions, no marketing cards and no price support loans. Signing up for the TTPP is the final and only opportunity to receive federal payments related to tobacco production. Sign up for the program is voluntary.
On Oct. 22, 2004, President Bush signed the American Jobs Creation Act of 2004, which included the Fair and Equitable Tobacco Reform (the “Tobacco Buyout”). USDA's Farm Service Agency is charged with administering the program.
More information about the TTPP can be found on the World Wide Web at www.fsa.usda.gov/tobacco or by calling 1-866-887-0140.