No Tobacco Buyout From Santa This Year

Congress goes "home for the holidays" without buyout. Richard Davis

Published on: Dec 1, 2003

First, Philip Morris vice president of governmental affairs John Scruggs wrote a letter to various members of Congress, making plain the company would not support any tobacco quota buyout unless it was coupled to Food and Drug Administration (FDA) regulation of tobacco.

Next, word came from Capitol Hill that tobacco state legislators were seeking a slimmed-down version of a buyout.

That was followed by silence -- an indication that a quota buyout in 2003 had failed. Now legislators have gone home for the holidays without a tobacco buyout. And experts say, although proponents of a quota buyout will try again, 2003 was the best hope for those seeking a quota buyout.

It is uncertain at this point if the failed 11th-hour wrangling for a "buyout lite" set a new standard for the quota negotiations. That proposal would have scaled back payments to quota owners and tobacco growers.

Quota owners would get $5 per pound of quota tobacco, instead of the $8 in the original proposal. Growers would get $2 per pound for each pound of tobacco they grow.

Tobacco growers who own their own quota would receive a total of $7 per pound for tobacco they both own and grow.

As bad for growers as the per-pound cuts, a buyout lite would most likely be based on the much-reduced 2002 quota. In contrast, most proposed versions of a buyout would be based on the quota in years past, when tobacco crops were much larger.

On the plus side of the equation, tobacco companies would not be able to subtract other negotiated grower payments from the buyout-lite version. That would be a partial offset to cuts in this new buyout proposal, although a minor one.