Cost Information on the USDA Tobacco Program

Pursuant to a congressional request, GAO obtained cost information on the Department of Agriculture's (USDA) tobacco price-support program. Specifically, GAO was asked to identify: (1) the costs of the tobacco program prior to passage of the No Net Cost Tobacco Program Act of 1982; (2) the costs that have accrued on the 1982 flue-cured and burley crops; and (3) whether the assessment program is adequate to ensure that the program is carried out at no cost to the government.

GAO found that: (1) tobacco loans made since 1938 have totaled about $5 billion, of which over $58 million have not been recovered; and (2) accrued carrying and interest costs on 1982 flue-cured and crop year burley tobacco totaled about $168.7 million. The act requires producers to pay an assessment that is deposited into a fund to ensure that the government sustains no net losses after the tobacco has been sold. However, since the volume of 1982 crop year tobacco coming under loan was higher than originally projected, USDA concluded that the 1982 crop assessment was inadequate. USDA estimated that additional funds are needed to recover the program's costs. GAO noted that USDA plans to collect the shortages through increased assessments on subsequent crops.