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1 (October 14, 2003)

handle is hein.crs/crsmthabcdj0001 and id is 1 raw text is: Order Code RS21642 October 14, 2003 CRS Report for Congress Received through the CRS Web Comparing Quota Buyout Payments for Peanuts and Tobacco Jasper Womach Specialist in Agricultural Policy Resources, Science, and Industry Division Summary 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). Both peanuts and tobacco have had a long history (dating back to the 1930s) of federal price support achieved through a combination of marketing quotas and nonrecourse loans. The 2002 farm bill (P.L. 107-17 1, Sec. 1301-13 10) ended peanut quotas with a buyout payment to peanut quota owners, but continued a support program for producers. Legislation is pending in the 108'h Congress (S. 1490, McConnell; H.R. 3160, Fletcher) that likewise would provide tobacco quota owners with a buyout payment. However, unlike peanuts, active tobacco producers would be given a lump sum transition payment but no future support. Another important distinction is that tobacco payments would be funded from assessments on tobacco product manufacturers and importers. In contrast, peanut buyout payments and continuing support program operations are funded by the federal government. The purpose of this analysis is to provide a generally consistent comparison of the benefits provided to peanut quota holders and producers and proposed benefits concerning tobacco. It is not the intention of this analysis to attempt to determine the appropriate size of these buyout payments. Congressional Research Service + The Library of Congress

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