Tobacco buyout not yet a done deal

Consensus is coming on a tobacco buyout, but it isn't a done deal yet. U.S. Senate staffers are moving forward with draft tobacco buyout legislation while the House is looking at two separate alternatives.

“A lot of work has been done and an awful lot of progress has been made, but it's still too early to say what will happen in the end,” says Blake Brown, North Carolina State University Extension ag economist.

Some industry observers expect Food and Drug Administration regulation of cigarettes to carry a buyout through Congress. However, at present FDA regulation of cigarettes is on a separate track through Congress. The draft discussions in both the House and Senate do not mention FDA regulation.

While no senator has signed on to the draft, $8 for quota owners and $4 for growers is the cornerstone of the legislation The Senate discussion for the buyout for quota owners is based on 2002 quota levels; 2000-2002 quota levels for flue-cured growers; and 2000-2001 levels for burley producers.

The Senate draft would have “flexible production controls” that allow transfer of tobacco to anyone within the same county. If the tobacco acreage was not grown, it would be pooled and re-distributed within the state, Brown says.

A traditional tobacco state would be able to produce at the maximum 1998-2002 level, whichever year is the most. “In the Senate, it would be an acreage eligibility, not a poundage quota,” Brown says. “The secretary of agriculture can change the base year. There would be a lot of flexibility in the production controls.”

In the House, two bills have emerged.

Philip Morris, the nation's largest cigarette manufacturer, favors the bill introduced by Mike McIntyre, D-N.C. and Tom Davis, R-Va., bill. In concept, the discussion draft in the House is similar to the Senate version, except that it uses 1998 as the base year, Brown says.

The draft legislation ends price support, places geographical restrictions on tobacco production and continues federal crop insurance for tobacco.

The draft legislation has the $8 for quota holders and $4 buyout for growers. The payments to active growers would run from 2004 through 2008. The draft legislation also sets up a permanent advisory board called the Tobacco Quality Board.

Cigarette manufacturers and tobacco importers would be assessed fees to fund the buyout.

Under a buyout bill introduced by U.S. Rep. Ernie Fletcher, R-Ky., quota holders would get $8 per pound and growers $4 per pound. Growers who quit would get an extra $2 per pound. Post-buyout, the Fletcher bill looks “very much like the current program,” Brown says. “The question that's being raised is, ‘can you get a buyout and have a similar program?’”

The Fletcher bill moves quota in the hands of growers.

The House discussion piece has some production controls after the buyout, but not as stringent as the Fletcher bill, Brown says.

Both the House and Senate discussion drafts have price-safety legislation. The Senate leans toward price insurance as a risk management tool.

“At some point, the House will have to come to a consensus over Fletcher and McIntyre-Davis,” Brown says.

“I'm scared to death that we're going to miss the buyout,” says James R. Smith, a dark- and burley-tobacco producer in Houston County, Tenn. He's expressed concern in an opinion piece written in a farm newspaper in Kentucky. He says many growers are wishing “Fletcher would join the McInytre bill … because it has the support of the largest tobacco company.

“If tobacco states cannot unify behind one bill, how can we expect to get passage of a buyout from non-tobacco states?” Smith asks. He fears that both bills will make it to the floor and the buyout will get shot down.

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