Category: Policy

Historically, tobacco has been an important crop in several U.S. southern states. However, due to a variety of factors, including health issues surrounding the crop, international competition, and policy/regulatory changes, the U.S. tobacco industry has declined by nearly 70% over the past 25 years.  

A previous article in Southern Ag Today, highlighted some of the major structural changes following the elimination of the federal tobacco program (better known as the tobacco buyout) in 2004. Another important part of the modern day tobacco story that has not received much attention has been the significant “investment” dollars made available for tobacco farmers and rural communities evolving from tobacco’s  Master Settlement Agreement (MSA). 

In 1998, 46 state attorney generals signed the MSA with the major U.S. tobacco companies to settle state lawsuits to recover health care costs associated with treating smoking-related illnesses. ^[1] To date, the MSA represents the largest civil lawsuit settlement in U.S. history.

Under the MSA, tobacco manufacturers agreed to make annual payments to the settling states into perpetuity, as long as cigarettes are sold in the United States. While encouraged to use these funds for tobacco cessation, tobacco control, and other health-related issues, participating states were given complete control over how to use these settlement funds. Most state governments have used these funds over the past 25 years for at least a portion of public health care expenses, but many states have opted to distribute these funds for other state priorities including funding for education, childhood development, infrastructure investment, and balancing state budgets. Given the significant impact of the MSA on tobacco economies and rural communities, three traditional tobacco-producing states, Kentucky, North Carolina, and Tennessee have elected over the years to use a significant share of their MSA dollars to fund ag diversification in their state’s farm economy.

During the 1990s, tobacco accounted for 24% of Kentucky ag cash receipts, 16% in North Carolina, and 11% in Tennessee – representing the number one cash crop in each state (Figure 1). Since the 1990s, tobacco cash receipts in Kentucky have declined by 72%, compared to a 66% loss in Tennessee and a 47% loss in North Carolina.  However, ag cash receipts have more than doubled in all three states on a nominal basis since 2000 (Figure 2) and are up around 30% when adjusted for inflation. Tobacco now accounts for only around 3% of ag cash receipts in Kentucky and North Carolina and less than 2% in Tennessee.

Given the magnitude of the tobacco losses, the growth in ag cash receipts in these historically tobacco-dependent states has been very impressive. Imagine the outcome of any state’s ag economy losing over half of its top ag enterprise such as a mid-western state experiencing a greater than 50% reduction in their grain sales or a Wisconsin losing over half of its dairy receipts. Not only have ag cash receipts increased substantially in North Carolina, Kentucky, and Tennessee over the past 25 years, but ag sales in these three tobacco states have actually increased on a percentage basis more than the aggregate receipts in the remaining eleven states in the Southern region since 2000. Arguably, access to these diversification funds evolving from the MSA (along with tobacco buyout dollars) have contributed greatly to this growth in the ag economies in these major U.S. tobacco states.

North Carolina has had two entities that have accessed MSA funds over the past 25 years to support agriculture and its tobacco-dependent rural communities —  the North Carolina Tobacco Trust Fund and the Golden LEAF Foundation. The Kentucky Agricultural Development Fund (KADF) also recently celebrated 25 years of existence of providing 50% of their MSA dollars to agriculture, while the Tennessee Agriculture Enhancement Program )TAEP) have utilized a portion of these MSA funds to support ag diversification since 2005. In aggregate, these entities have invested more than one billion dollars of MSA dollars among tobacco producers and their rural communities over the past 25 years, covering more than 100,000 projects. These projects are all over the board, including  funding alternative ag enterprises, farm and rural community infrastructure, programs supporting beginning farmers, improving crop and livestock marketing/management, investing in regional and local food markets, agritourism, food processing,  ag education, workforce development, leadership and ag promotion programs along with a host of other initiatives to help offset  tobacco incomes in tobacco-dependent regions in the South. 

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^[1] Florida, Minnesota, Mississippi, and Texas were not signatories to the MSA as they had their own individual settlements with U, S. tobacco companies.  

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Snell, Will. “Tobacco Master Settlement Agreement Investment in Diversification of Southern Agriculture.” Southern Ag Today 5(33.4). August 14, 2025. Permalink

Last summer, we wrote about a novel new concept for adding base acres to farms that had been proposed in the House Ag Committee-passed version of the 2024 Farm Bill (Farm, Food, and National Security Act of 2024). While that farm bill never came to fruition, the concept ultimately was adopted in the One Big Beautiful Bill (H.R. 1) that was recently signed into law by President Trump.   The provision will allow up to 30 million additional base acres across the nation. Today’s article addresses some of the questions we’ve been asked, while providing an overview of the mechanics. 

• What will happen to my existing base acres?  Nothing. 

• If this doesn’t affect my existing base acres, then what does it do?  For those farms where recent plantings (described below) exceed the number of existing base acres on the farm, it allows the landowner to add additional base acres. 

• How does it work? There are essentially two simple components to the additional base provision that address acres planted to both covered and non-covered commodities:
  • Covered Commodities:  If the average number of acres of covered commodities planted (or that were prevented from being planted) on a farm from 2019 through 2023 exceeds the number of existing base acres on the farm, you are eligible to add the difference as additional base acres.
  • Non-Covered Commodities:  You can also add the number of acres of eligible non-covered commodities planted (or that were prevented from being planted) on a farm from 2019 through 2023 as additional base acres, so long as the total does not exceed 15% of the total acres on the farm.

• If I get additional base acres, what crops will they be assigned to?  They will be assigned in proportion to the covered commodities you planted from 2019 to 2023.

• If I have “unassigned crop base” from previous changes to U.S. cotton policy, is it eligible to be included in the allocation of additional base acres?  Yes.

• Will I get these new base acres in time for the 2025 crop year (i.e., the crop I harvest in 2025)? No. The OBBB clearly stipulates that the new base will be in effect for the 2026 crop year.

• What happens if USDA discovers there are more than 30 million acres of eligible new base?  If the total number of eligible acres across the country exceeds 30 million acres, the Secretary would be required to apply a pro-rata, across-the-board (i.e., no progressive factoring) reduction to all farms to reduce the number of eligible acres to equal 30 million. For example, if USDA determines there are 60 million acres of eligible new base, everyone would see their additional base acres factored by 50% (i.e., 30 million divided by 60 million). 

• I’ve read that this concept wasn’t vetted and that it was designed to only help one region of the country. Is that true?  No, that’s just political nonsense. Yes, the OBBB was a partisan process—reconciliation is notoriously partisan and has been repeatedly used by both political parties—but as we noted above, this provision went through a full committee mark-up last summer and has been thoroughly discussed/vetted over the last year. Finally, while this will certainly provide more benefit to areas like the Northern Plains where more covered commodities are being planted than in the past, we see no evidence that this was done to provide special benefit to any single region.  In fact, it seems obvious to us that it was designed to address repeated complaints from all corners of the country to help landowners who—for whatever reason—have land that is not fully based.

• Do I need to reach out to my county office?  No. Congress is requiring USDA to go through a notification process with landowners. Further, producers already report their plantings to USDA’s Farm Service Agency (FSA), so in theory, FSA already has the data it needs to automate this process. With that said, the bill also provides an opportunity for a landowner to opt out of receiving additional base acres if they wish. Also, for purposes of assigning the new base to crops, for acreage that has been planted to a subsequent crop (other than a covered commodity produced under an established practice of double cropping), the owner gets to elect the covered commodity (but not both) to be used for that crop year in determining the 5-year average. In other words, there will be cases where the process cannot be completely automated.

Bottom line: this is a significant change from previous law that can only help producers (i.e., there is no downside).  As always, the information above is provided for educational purposes only and is subject to change.  USDA is the final authority on how this provision will be implemented, so be on the lookout for details in the weeks and months ahead.

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Fischer, Bart L., and Joe Outlaw. “Addressing Questions about Additional Base Acres in the One Big Beautiful Bill.” Southern Ag Today 5(31.4). July 31, 2025. Permalink

As detailed in a previous Southern Ag Today article, the American Relief Act of 2025 was signed into law in December 2024 with the following key provisions:

• funded the government through March 14, 2025;
• extended the 2018 Farm Bill provisions through September 30, 2025; and
• provided the U.S. Department of Agriculture with $30.78 billion to deliver disaster recovery assistance to farmers and livestock producers.  $10 billion was designated for economic losses and the remaining $20 billion was for physical losses.

As we noted in an article on July 3, 2025, sign-up for the economic loss program—the Emergency Commodity Assistance Program (ECAP)—is underway.  To date, nearly $8 billion has been provided to producers through ECAP.  We also noted that USDA has released approximately $1 billion in Emergency Livestock Relief Program (ELRP) payments to affected producers, and enrollment for another $1 billion in ELRP aid for flooding losses is targeted to begin in mid-August. Last week, USDA announced that signup has begun for the highly-anticipated Supplemental Disaster Relief Program (SDRP) which targets $16 billion in assistance to producers for necessary expenses due to losses of revenue, quality or production of crops due to weather related events in 2023 and 2024. The remainder of this article will focus on SDRP.

Notably, SDRP is being rolled out to producers in two stages.  Stage 1 is providing payments to producers for eligible crop, tree, and vine losses calculated using data already on file with USDA from previously issued Federal crop insurance indemnities and Noninsured Crop Disaster Assistance Program (NAP) payments.  Stage 2 will target uncovered losses, including non-indemnified shallow losses and quality losses, and signup is estimated to begin in mid-September.

Following are a few of the questions we have received and our responses.  While this is intended to serve as educational guidance, it is no substitute for consulting USDA’s SDRP landing page or for contacting your local FSA office as they ultimately are responsible for implementing the program.

1. How do I know if Stage 1 applies to me?  In Stage 1, USDA is using a streamlined, pre-filled application process for eligible crop, tree and vine losses leveraging existing NAP data as well as data on file with RMA for losses covered by certain federal crop insurance policies. If you expected to receive an application but did not, you can also consult the Final Rule (Page 30572) for more details, including the list of losses that aren’t covered. Otherwise, you can consult your local FSA office.

• If I get a pre-filled application for Stage 1, doesn’t that prove that I’m eligible?  No! In an effort to ensure no one is left out, USDA is sending pre-filled applications (as detailed above) regardless of the cause of loss. But, it is up to you to determine if your losses were due to a qualifying disaster event that Congress chose to cover under SDRP (you can find that list here under “Eligibility”). If your losses were due to a qualifying disaster event, you will simply list that event in Block 18 on the SDRP application you receive in the mail.

• Does the loss I list on the SDRP application have to match the loss listed on my crop insurance loss records? In other words, do I need to go to my crop insurance agent to find out what losses were listed on my crop insurance loss forms? Not necessarily. You may have suffered from multiple loss events on the farm, even if all of those did not make it onto your crop insurance loss records.  If you suffered from a qualifying disaster event (see above)—regardless of the loss event listed on your crop insurance records—you can self-certify to that event in Block 18 on your SDRP application. Please note that the FSA county committee will be keeping a close eye on applications to ensure that the loss event you listed is relevant and actually occurred in the county.

• If I had a loss on my farm but it’s not due to one of the “qualifying disaster events” covered by SDRP, shouldn’t I just pick one of the qualifying disaster events from the list and submit my application?  No! While it may be very painful for a producer who had a loss that was due to an ineligible disaster event, the fact remains that Congress chose to cover only certain disaster events. If USDA is not covering your particular disaster event, it’s because Congress did not provide the authority for them to do so.

• What if I suffered from drought but my county did not meet the D2 and D3 thresholds established by Congress?  If you are in a county that does not meet the D2 and D3 thresholds established by Congress (see the list of eligible counties here), you are not eligible to apply for SDRP based on “qualifying drought.” With that said, if you also suffered from another qualifying disaster event (e.g., excessive heat), you can self-certify by listing that loss event in Block 18 on the SDRP application.  Again, note that the FSA county committee will be keeping a close eye on applications to ensure that the loss event you listed is relevant and actually occurred in the county.

• What if I have an error in the pre-filled parts of my application?  Can I just mark them out and make corrections?  No!  USDA has made it clear that any handwritten changes to the pre-filled portions of the application will nullify the application.  If the pre-filled portions are in error, you need to go back to the source (i.e., either your crop insurance agent for crop insurance records or to the local FSA office for NAP records). They can correct the underlying problem and updated applications can be re-printed by your local FSA office.

• My pre-filled application (Block 14) lists my “Estimated SDRP Payment.”  Is that the amount I should expect to see deposited into my account?  As we understand it, that is the gross payment BEFORE both the payment factor of 35% and payment limits are applied.

• Did USDA just make up the 35% factor?  While we don’t know everything that went into determining the factor, consider the following: (1) USDA made clear that progressive factoring (i.e., applying different payment factors based on gender, race, etc—as was done in the previous Administration) would not be used in SDRP; (2) USDA presumably estimated the total expected SDRP payments relative to the total funding available and determined that 35% was appropriate; and (3) they had to ensure that funding was available for producers who have eligible losses in Stage 2.  Notably, if funding is left over after all applications have been submitted, USDA could issue another round of payments to producers.

• Does the payment limit apply to each year separately (i.e., $125,000 for 2023 and $125,000 for 2024) or is it a combined limit?  The payment limit applies separately to both 2023 and 2024.

1. If I receive an SDRP payment, do I have to commit to purchase crop insurance going forward?  Yes, generally, producers receiving aid must maintain crop insurance or NAP coverage for the next two years at 60% or higher, or repay the assistance with interest.

1. Are all states eligible for SDRP?  This round of disaster assistance was somewhat different than the past.  Congress chose to provide assistance in the form of block grants to Connecticut, Hawaii, Maine, and Massachusetts. As a result, they are excluded from SDRP but will use state block grants funded by the American Relief Act of 2025 to compensate producers for losses.

We plan to update this as additional information becomes available. Importantly, as noted above, you should use the information in this article simply as educational guidance. For any questions related to your specific application/circumstances or for official guidance on the operation of SDRP, it is important to consult USDA’s SDRP landing page and/or reach out to your local FSA office.

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Outlaw, Joe, and Bart L. Fischer. “Supplemental Disaster Relief Program Sign-up Announced.” Southern Ag Today 5(29.4). July 17, 2025. Permalink

As we noted back in December 2024, the American Relief Act provided $30.78 billion in relief for agricultural producers—$10 billion for economic assistance and $20.78 billion for natural disaster relief. 

Signup for the economic assistance—known as the Emergency Commodity Assistance Program (ECAP)—began on March 19, 2025, and runs through August 15, 2025. Initial ECAP payments were factored by 85% to ensure total program payments do not exceed available funding. If all goes as planned, FSA may issue a second payment in August.

USDA has also started rolling out the $20.78 billion in natural disaster assistance. For example, on May 29, 2025, USDA announced that approximately $1 billion in Emergency Livestock Relief Program (ELRP) payments were being issued to affected producers. At this point, anticipation is building for sign-up to begin for the Supplemental Disaster Relief Program (SDRP). SDRP is the successor to the Wildfires and Hurricanes Indemnity Program (WHIP) and the Emergency Relief Program (ERP) summarized in Table 1.

Table 1. Recent History of Natural Disaster Relief for Agricultural Producers

Program	Crop Year	Authorizing Statute	Enactment Date
WHIP	2017	P.L. 115-123	2/9/18
WHIP+	2018 & 2019	P.L. 116-20	6/6/19
ERP	2020 & 2021	P.L. 117-43	9/30/21
ERP	2022	P.L. 117-328	12/29/22
SDRP	2023 & 2024	P.L. 118-158	12/21/24

SDRP will provide assistance to producers for necessary expenses related to losses of revenue, quality or production of crops (including milk, on-farm stored commodities, crops prevented from planting, and harvested adulterated wine grapes), trees, bushes, and vines, as a consequence of droughts, wildfires, hurricanes, floods, derechos, excessive heat, tornadoes, winter storms, freeze, including a polar vortex, smoke exposure, and excessive moisture occurring in calendar years 2023 and 2024. While the details will be released by USDA once approved by OMB, following are a few key observations:

• Sign-up Date. USDA has announced a target date of July 7, 2025, for sign-up to begin. While that date may slip a bit as OMB finalizes its review, all indications are that a sign-up announcement is imminent. 

• Funding. While $20.78 billion was reserved for natural disaster assistance, Congress earmarked $2 billion for livestock (via ELRP), and block grants to states for hurricane relief must also be funded from that total. As a result, the amount available for SDRP will be significantly less than $20.78 billion.  

• Factoring. When compared against projected losses, there is virtually no question that USDA will have to implement a payment factor.  Recall, the Biden Administration noted that—had they implemented a flat payment factor for ERP 2022—it would have been 27%. Their solution at the time was to implement progressive factoring instead, an approach that U.S. Secretary of Agriculture Brooke Rollins has repeatedly rejected. So, while we know there will not be progressive factoring, we do not know what the flat factor will be. Regardless, we’d argue that you shouldn’t get too hung up on the payment factor. Why? USDA will simply estimate projected payments, compare it to available funding, and set the factor accordingly. In other words, if USDA’s approach with SDRP is generous in calculating payments, then it will require a more significant factor to make sure it doesn’t exceed available funding. The most important part to remember is that USDA will be allocating a historic amount of disaster funding in the months ahead…and any payment factor will be applied uniformly to all program applicants.

• Sequence.  USDA has noted that SDRP sign-up will focus first on those with indemnified losses. USDA is targeting September 15, 2025, to begin sign-up for those with uncovered losses (i.e., shallow losses) including producers without crop insurance, and quality losses.

We will provide additional details once SDRP is officially released.

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Fischer, Bart L., and Joe Outlaw. “Sign-up for Natural Disaster Relief Beginning Soon.” Southern Ag Today 5(27.4). July 3, 2025. Permalink

We often are asked by the media about the size of and need for government assistance that is provided to U.S. farmers when something goes wrong (e.g., bad prices, yields or both). The first thing we do is highlight that the safety net provided for by Congress is designed to offset some – but not all – of the risks faced by farmers.  It might sound like semantics, but in the policy world…words matter.

The rest of the conversation generally involves talking about uncertainty in U.S. agriculture.  Rather than provide an exhaustive list here, let’s just focus on the three primary determinants of profitability: prices, yields and costs.

• U.S. farm prices are determined by world supply and demand for the crop, the price of its substitutes, and policy.  What type of policy?  First, U.S. producers must compete against producers that are heavily subsidized by the governments of our competitors around the world.  Second, the trade policies of those countries (such as tariffs or other non-tariff barriers to trade) impact prices received by U.S. producers as well. Third, monetary policy in the U.S. impacts interest rates that farmers have to pay to finance their crops, land and equipment and exchange rates that tend to make our exports relatively more expensive than our competitors.  Other types of policies that can impact U.S. crop prices are conservation, biofuels, taxes, and more recently health regulations such as those listed in the MAHA report that questions the health impacts of certain agricultural products (e.g., sugar) or bi-products (e.g., vegetable oils).
  
• U.S. farm yields are primarily impacted by weather…enough said about that.
  
• U.S. crop production costs are impacted by the supply and demand of each of the individual inputs, from seed, fertilizer, and chemicals to equipment, farmland, and labor, among others. Increasingly, for many producers, these purchases also must be financed at elevated interest rates. In addition, all of the policy areas discussed under farm prices above can also impact crop production costs.  

These conversations usually conclude with an explanation that, even though there is a lot of uncertainty, U.S. farmers understand how the forces of supply and demand impact crop prices and input costs and are accustomed to dealing with erratic weather. However, it’s the uncertainty that comes from policy that keeps them up at night.  In our minds, the government safety net helps reduce some of their and their lender’s uncertainty regarding the ability to remain viable and able to try again next year in search of profits.

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Outlaw, Joe, and Bart L. Fischer. “Dealing With Uncertainty in Agriculture.” Southern Ag Today 5(25.4). June 19, 2025. Permalink