Comparing Quota Buyout Payments for Peanuts and Tobacco
Publication Date: October 2003
Publisher(s): Library of Congress. Congressional Research Service
Legislation is pending in the 108th Congress (S. 1490, H.R. 3160) to eliminate tobacco quotas and compensate quota owners (whether they are absentee owners or active producers) at the rate of $8 per quota pound. Active producers would lose price support, but would receive a lump sum transition payment of $4 per pound on their production history, including the quota they own as well as any quota they rent.
A precedent for quota buyouts was established in the 2002 farm bill, which terminated peanut quotas and compensated the owners with a $0.55 per pound payment. Active peanut producers continue to receive price support. A comparison of peanut and tobacco quota buyout rates shows that the two are substantially comparable (relative to past quota rental rates). However, current USDA budget projections indicate that continuing operation of the peanut subsidy program likely provides significantly higher benefits than the proposed tobacco transition payment (relative to the costs of production of each commodity).