Tobacco Farmer Assistance Page: 1 of 6
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Order Code RS20802
Updated March 5, 2004
CR8 Report for Congress
Received through the CRS Web
Tobacco Farmer Assistance
Jasper Womach
Agriculture Policy Specialist
Resources, Science, and Industry Division
Summary
Efforts to reduce tobacco consumption in the United States, stimulated by the 1998
Master Settlement Agreement, have contributed to a sharp decline in the demand for
U.S.-grown tobacco. The other major contributor to the long term decline in domestic
as well as foreign demand is the federal price support program, which limits supply and
raises the price of U.S. tobacco above competitive market levels. Consequently,
foreign-grown tobacco is displacing U.S. tobacco in both domestic and world markets.
Because of the drop in demand, farmers have asked for and received compensation and
assistance from cigarette manufacturers and the federal government. Manufacturers
pledged $5.15 billion in payments to farmers to be distributed over 12 years. Also,
Congress has approved $328 million in tobacco loss payments to farmers for FY2000,
$340 million for FY2001, another $129 million for FY2001, and $53 million for
FY2003. In addition, losses on 1999-crop price support loan stocks, amounting to $625
million, were shifted to taxpayers.
This report will be updated as legislative events warrant.
The tobacco price guarantee provided by the federal support program is supposed to
support and stabilize the income of growers. However, farmers have seen an especially
sharp drop in sales volume the last two years. In response, they have cut back production
51% since 1997. Like other farmers suffering economic hardship, tobacco growers have
asked for and received assistance.
U.S. Tobacco Production and Markets
Based on the 1997 Census of Agriculture, about 90,000 farms in the United States
produce tobacco. They primarily are located in Kentucky, North Carolina, and
neighboring states. According to U.S. Department of Agriculture (USDA) data, crop year
2003 production was about 831.2 million pounds from 416,210 acres (4.6 acres per farm),Congressional Research Service V The Library of Congress
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Tobacco Farmer Assistance, report, March 5, 2004; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc806833/m1/1/: accessed April 19, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.