The Senate on Monday passed a tobacco buyout bill. The legislation, which was approved 69 to 37, now heads to the president’s desk for his signature.
The tobacco buyout was included in a $316 billion major rewrite of corporate tax law. The House had passed the legislation last Thursday, Oct. 7.
The tobacco buyout contains $10.1 billion for buyout quotas: $7 per pound for quota owners, $3 for growers. Some $9.6 billion will be paid to growers and quota owners. Payments, over 10 years, are based on 2002. The remaining $500,000 will be used to dispose of stocks held by the grower associations and the Commodity Credit Corporation.
Cigarette manufacturers will fund the buyout based on their share of the U.S. cigarette market. The bill did not contain FDA regulation of cigarettes.
Growers and quota owners are allowed to assign their payments to a financial institution. “The significance of this provision,” writes Blake Brown, North Carolina State University ag economist, “is that some financial institutions have indicated an interest in providing growers and quota owners with up-front, lump-sum payment in exchange for the stream of the buyout payments. Growers and quota owners will need to carefully weigh the cost of this option since the financial institutions will retain a portion of the stream of payments in return for making a lump-sum payment.
In addition to eliminating the tobacco program, the buyout lifts restrictions on where tobacco can be grown and ends price support and quotas.
Phase II payments will be eliminated.
The Southeast Farm Press will have extensive coverage of the tobacco buyout in its Nov. 3 print edition.