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The Post-Buyout Experience: Peanut and Tobacco Sectors Adapt to Policy Reform

Author

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  • Dohlman, Erik
  • Foreman, Linda F.
  • Da Pra, Michelle

Abstract

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.

Suggested Citation

  • Dohlman, Erik & Foreman, Linda F. & Da Pra, Michelle, 2009. "The Post-Buyout Experience: Peanut and Tobacco Sectors Adapt to Policy Reform," Economic Information Bulletin 56628, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersib:56628
    DOI: 10.22004/ag.econ.56628
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    File URL: https://ageconsearch.umn.edu/record/56628/files/EIB-60.pdf
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    References listed on IDEAS

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    1. Rucker, Randal R & Thurman, Walter N & Sumner, Daniel A, 1995. "Restricting the Market for Quota: An Analysis of Tobacco Production Rights with Corroboration from Congressional Testimony," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 142-175, February.
    2. MacDonald, James M. & Korb, Penelope J., 2008. "Producers Rely on Contracts To Manage Increased Price Risks," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-1, April.
    3. A. Blake Brown & Randal R. Rucker & Walter N. Thurman, 2007. "The End of the Federal Tobacco Program: Economic Impacts of the Deregulation of U.S. Tobacco Production," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(4), pages 635-655.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Schmitz Andrew & Haynes Dwayne J. & Schmitz Troy G., 2013. "Benefit-cost analysis: government compensation vs. consumer tax model," Journal of Benefit-Cost Analysis, De Gruyter, vol. 4(3), pages 375-389, December.
    2. Bolotova, Yuliya V., 2018. "An Analysis of Price Behavior in the United States Peanut Industry," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266537, Southern Agricultural Economics Association.
    3. Dohlman, Erik & Foreman, Linda F. & Da Pra, Michelle, 2010. "Post-Buyout Structural Change in the Peanut and Tobacco Sectors," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56355, Southern Agricultural Economics Association.
    4. Bolotova, Yuliya V., 2022. "Price-Fixing in the U.S. Broiler Chicken and Pork Industries," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 4(4), September.
    5. Schmitz Andrew & Schmitz Troy G., 2010. "Benefit-Cost Analysis: Distributional Considerations under Producer Quota Buyouts," Journal of Benefit-Cost Analysis, De Gruyter, vol. 1(1), pages 1-15, July.
    6. Foreman, Linda F. & McBride, William D., 2011. "Policy Reform in the Tobacco Industry: Producers Adapt to a Changing Market," Economic Information Bulletin 117969, United States Department of Agriculture, Economic Research Service.
    7. MacDonald, James M., 2011. "Why Are Farms Getting Larger? The Case Of The U.S," 51st Annual Conference, Halle, Germany, September 28-30, 2011 115361, German Association of Agricultural Economists (GEWISOLA).
    8. Bolotova, Yuliya V., 2024. "Market Power in the U.S. Peanut Industry," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 5(4), January.
    9. Bolotova, Yuliya V. & Smith, Nathan B., 2017. "An Analysis of the South Carolina Peanut Industry," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252966, Southern Agricultural Economics Association.
    10. MacDonald, James M. & Korb, Penelope J., 2011. "Agricultural Contracting Update: Contracts in 2008," Economic Information Bulletin 101279, United States Department of Agriculture, Economic Research Service.
    11. Timothy E. Josling & Stefan Tangermann, 2015. "Transatlantic Food and Agricultural Trade Policy," Books, Edward Elgar Publishing, number 15889.
    12. Bolotova, Yulia V., 2023. "Market Power in the U.S. Dairy Industry," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 5(2), March.
    13. MacDonald, James M. & Korb, Penni & Hoppe, Robert A., 2013. "Farm Size and the Organization of U.S. Crop Farming," Economic Research Report 262221, United States Department of Agriculture, Economic Research Service.

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    Keywords

    Agricultural and Food Policy; Industrial Organization; Institutional and Behavioral Economics; Marketing;
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