Listed below are some of the most popular questions received at the Pitt County Center related to the tobacco buyout.
Answer: USDA-FSA has contracted with Wachovia Bank to disseminate information through a mass-media campaign and series of regional meetings. This effort will inform quota owners and producers when, where, and how to sign up for the buyout payments.
Answer: Areas for which Extension can provide useful information are 1) how to evaluate whether or not to assign buyout payments to a financial institution in return for a lump sum payment, 2) tax implications of the tobacco buyout, 3) potential associated legal implications, and 4) information useful in personal and business investment decisions with the buyout funds.
In addition, a television program addressing tobacco buyout issues has been scheduled for March 15 from 9 to 10 pm. The date for this program could change so please refer back to this web site for more information. This program will be aired on OPEN/net, an informational program produced by the NC Agency for Public Telecommunications. This program will be also likely be broadcasted on public access cable channels across the state. You can find channels for your area at the OPEN/net website: http://www.ncapt.tv/net_tv.htm. A public viewing of this program will be provided at the Pitt County Agricultural Center after the date of this live telecast.
Answer: The payments are guaranteed in that they are "contract payments". This has been confirmed with USDA attorneys. The legislation clearly states that they are contract payments and USDA has confirmed this in the regulations that will be published next month.
Answer: Tobacco quota holders and producers of quota tobacco will be eligible for the tobacco buyout. Quota holders are the owners of a farm, as of the date the President signs the bill, with an established 2004 basic marketing quota on their farm. Producers would include owners, operators, landlords, tenants, or sharecroppers who shared in the risk of producing tobacco during any of the 2002, 2003, or 2004 marketing years.
Answer: Because this is landmark legislation that is very intricate and complicated, it will take some time to properly implement it. USDA expects the implementation time frame to take about the same time as it took to implement the peanut quota buyout legislation. Implementation began immediately upon passage of the bill, and the Farm Service Agency will soon announce a contract sign-up period for the Tobacco Transition Payment Program. Information on program eligibility and application requirements will be made through the County FSA Office and via FSA's website.
Answer: The sign-up period for the tobacco buyout will begin March 15, 2005 and run through June 17, 2005. Sign-up will occur at local USDA Farm Service Agency (FSA) offices. It is assumed that regulations governing the payments will be released before the sign-up period begins.
Answer: The finantial institutions who could administer the funds for the tobacco buyout have not been determined. Under this bill, a 3rd party could be selected to perform this role. At this time, this role has not been determined.
Answer: The payments will be made in 10 equal annual installments beginning in 2005 and ending in 2014 or growers and allotment holders can elect to receive their tobacco transitions payments in one lump sum. Details are set to be announced in March 2005.
Answer: This has not be determined as of October 26, 2004 but could be in the 7-8% range.
Answer: To quota owners, the tax rate will likely be "capital gains" rate and for the grower it will likely be taxed as personal income.
Answer: Phase II payments will be terminated. A court judge ruled in December 2004 that cigarette manufacturers are not required to make the last Phase II payment. However, this ruling has been appealed and an out-of-court settlement for a partial payment is possible in 2005.
Answer: No payments will forwarded to the afterlife. Besides they won't do you any good there anyway. However, your estate will receive the payments."
Answer: The funds required to pay for the buyout will be obtained through assessments on manufacturers and importers of all of tobacco producers sold in the United States and are estimated to total $10.14 billion over a ten year period.
Answer: No geographical or acreage restrictions apply beginning with the planting of the 2005 crops of tobacco.
Answer: Yes. Multi-peril crop insurance will still be available for tobacco in 2005 and subsequent years. USDA-Risk Management Agency has released information on the price election for crop insurance on tobacco. The maximum price election will be $1.35 per pound for flue-cured tobacco and the price for catastrophic coverage is $0.75 per pound. You can learn more from the Risk Management Agency website.
Answer: The funds required to pay for the buyout will be obtained through assessments on manufacturers and importers of all tobacco products sold in the United States.
Answer: The Coop has announced a process to contract directly with tobacco farmers using two types of contracts. These are exclusive and non-exclusive contracts. The deadline for exclusive contracts was February 1 and the deadline for the non-exclusive contracts will be March 1, 2005.
Answer: The tobacco buyout will increase workload activities in our 16 tobacco states with marketing quotas over the next year. The 449 county offices will continue to administer the 2004 marketing quota and price support programs through FY 2005, when the tobacco program will end under the legislation. During this time, county office employees will be working with quota holders and tobacco producers in signing contracts and disbursing payments under buyout provisions. It is not known exactly what long-term impact the termination of the federal tobacco marketing quotas and price support loan programs will have upon county offices with heavy tobacco workloads. FSA staff in states with heavy tobacco program workloads do not exclusively work on tobacco programs issues and have assignments in other areas. Because of a number of unanticipated heavy workload items such as disaster legislation and loan deficiency payments, there will be plenty of work over the next year for all of FSA and additional duties can and will be reassigned as necessary.
Answer: Listed below are two options to consider for farmland in 2005.
Crop share - This may be the fairest method of farm leasing during this time of transition. Crop sharing allows for landlords to assume some of the risk of production and also allows the largest possible financial return to them. Arrangements such as 25% - 75% and 1/3 - 2/3 have been around for a while. One possible way for crop share is for the landowner to pay for one third of the soil amendments (lime, fertilizer and insecticide, etc) and then receive one third of the gross receipts.
Cash lease - This has by far been the most popular arrangement in farm leasing over the past several years. In these arrangements, a flat fee is paid per acre to the landowner as stipulated in the contract. Other items could be included such as land and ditch maintainence.
Keep in mind that any arrangement should be made in the form of a written contract. Listed below is a website which might assist anyone as they consider the details of a written contract.
This page
(http://www.ces.ncsu.edu/pitt/ag/tobacco/tobbuyoutfaqs.html) was
created by Mitch Smith on October 20, 2004
and updated on February 16, 2005.