U.S. Markets close in 6 hrs 16 mins

Final tobacco quota payment will not be reduced

Gary d. Robertson, Associated Press

RALEIGH, N.C. (AP) -- Former or current U.S. tobacco growers can anticipate getting their full, final annual payment from the quota buyout approved by Congress almost a decade ago despite impending automatic spending cuts.

U.S. Agriculture Department leaders told members of Congress this week they'll be able to complete by late 2014 the last of 10 payments due from the Tobacco Transition Payment Program to former quota holders and growers.

The department had warned late last year the program was subject to budget cuts set to begin next week, potentially resulting in a 7.2 percent reduction in the 10th and final payment due to people who previously had the right to farm and sell tobacco under the old price-support system. North Carolina is the nation's No. 1 flue-cured tobacco state, expected to receive nearly $4 billion in buyout payments from 2005 to 2014.

"This is a great victory for our tobacco farmers, their families, and our agricultural communities," U.S. Rep. Mike McIntyre, D-N.C., of tobacco-growing Robeson County, said in a prepared statement. "The federal government must keep the commitment it made to our farmers in the tobacco buyout 10 years ago."

Tobacco-state members of Congress had urged the department to avoid payment reductions, saying the U.S. government needed to fulfill a promise made to more than 400,000 right holders and farm operators in North Carolina and nationwide.

In separate letters dated Monday to Democratic Sen. Kay Hagan and Republican Rep. Richard Hudson, Agriculture Secretary Tom Vilsack wrote the program was still subject to the automatic spending reductions.

But he said funds that had been held back as a result of the so-called sequestration cuts during the federal fiscal year ending Sept. 30 are available for this year's payments. Funds held back this year could be used at the start of the next fiscal year in October "to complete the final payment," Vilsack wrote.

Hagan and Hudson, who had written separate letters in the fall urging the complete payments be made, also praised the apparent resolution Tuesday. They said the payments for the 2004 buyout, valued at $10 billion, were subject to the spending reductions because they came from a fee on tobacco product companies, not taxes.

The payment reduction "was a certainly a misguided effort all along," North Carolina Farm Bureau President Larry Wooten said in an interview. "But in any event, the real win is that people are (going) to receive these final benefits."

North Carolina's 76,000 quota holders and producers were expected to receive $3.9 billion in payments through the program, according to a 2004 University of Kentucky report. If distributed equally over 10 years, then 7.2 percent of one year's payment would have been about $28 million.

The money has provided an economic boost to tobacco-dependent communities and growers who relied on the golden leaf as their primary cash crop for generations. The payment recipients receive cash, or previously worked out a lump sum payment with a farm lender, which in turn receives the annual payment in exchange. Some farmers have used the money to buy farming equipment or diversifying crops.

Tobacco growers and rural communities could have seen "economic destitution" without the annual payments, Wooten said.

McIntyre said tobacco producers could receive up to 95 percent of their annual payments in the next two months, with the rest coming by the end of the calendar year. Payments will be made to financial institutions by Jan. 15, the U.S. Department of Agriculture said.

In an interview, Wooten praised Hagan and members of Congress from both parties for urging the USDA to make the final payment in full. More than 35 House members from several states signed a letter opposing the reduction, McIntyre's office said.