The Post-Buyout Experience: Peanut and Tobacco Sectors Adapt to Policy Reform
by Erik Dohlman, Linda Foreman, and Michelle Da Pra
Economic Information Bulletin No. (EIB-60) 56 pp, November 2009
Marketing quota and price support programs for peanuts and tobacco were a longstanding feature of U.S. farm policy, from the 1930s until the Government enacted quota buyouts, in 2002 for peanuts and 2004 for tobacco. Quota owners were compensated with temporary payments, but elimination of the quota programs exposed producers more to market risks and brought about structural changes at farm, regional, and marketwide levels. Since the buyouts, many peanut and tobacco farms have exited production. The farms that remain are mostly larger and have adopted new risk management strategies, such as contracting. Freed of the planting restrictions in the quota programs, production of peanuts, and to a lesser extent of tobacco, has been relocated to regions better suited to their growth. While total acreage and prices for peanuts and tobacco have remained below pre-buyout levels, the lower prices—along with increased production efficiency—have supported renewed growth in demand, particularly in export markets.
Keywords: policy reform, farm policy, buyouts, marketing quotas, peanuts, tobacco, adjustment, structural change
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