Losses in the Department of Agriculture's Tobacco Program

Pursuant to a congressional request, GAO provided pricing and cost information on flue-cured tobacco under the Department of Agriculture's (USDA) tobacco program. Specifically, GAO estimated: (1) the losses that USDA could incur on 1976 through 1981 tobacco crops; (2) the total inventory price reduction resulting from USDA-approved discount sale terms; (3) the total price reduction on actual tobacco sales under the discount sale terms; and (4) interest costs incurred by USDA on the 1982 flue-cured tobacco crop.

GAO found that: (1) USDA stands to lose money on the 1976 through 1981 flue-cured tobacco crops under loan; (2) the actual losses will not be known until all of the old tobacco is sold, but the total price of the tobacco inventory was reduced by $326 million from the regular sales price under the discount terms; (3) USDA is incurring both interest costs and storage charges on the old tobacco; and (4) USDA has sold about 11 percent of the 1976 through 1981 flue-cured tobacco inventory at about $35 million below its regular sales price. In addition, GAO found that USDA has lost about $16 million in interest costs on loans made on the 1982 flue-cured crop under the No Net Cost Tobacco Program.