Tobacco Price Support: An Overview of the Program (CRS Report for Congress)
| Release Date |
Revised Dec. 31, 2005 |
| Report Number |
95-129 |
| Authors |
Jasper Womach, Environment and Natural Resources Policy Division |
| Source Agency |
Congressional Research Service |
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Summary:
About 94% of U.S. tobacco production is flue-cured and burley (both being cigarette tobacco
types).
These crops are particularly important to the agriculture of North Carolina (where flue-cured is
grown) and Kentucky (where burley is grown). Together, these two states produce 66% of the total
U.S. tobacco crop. The federal tobacco price support program was designed to support and stabilize
prices for farmers. It operated through a combination of mandatory marketing quotas and
nonrecourse loans. Marketing quotas limit the amount of tobacco each farmer could sell, which
indirectly raised market prices. The loan program established guaranteed minimum prices. The law
required that the loan program operate at no net cost to the federal government. Apart from
year-to-year budget impacts, no-net-cost provisions of the law were intended to assure that all loan
principal plus interest would be recovered. (1) The 2004 tobacco
crop was the last crop eligible for federal support, as the program was terminated by P.L. 108-357 ,
Title VI, the Fair and Equitable Tobacco Reform Act of 2004. This report will be not be
updated.
1. Data in this report, unless otherwise specified, are
U.S. Department of Agriculture data from recent issues of Tobacco: World Markets and
Trade , published by the Foreign Agriculture Service, and Tobacco Situation and
Outlook
Reports , published by the Economic Research Service.
