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  • Q What are the changes to flue cured tobacco insurance for 2021?


    For the 2021 crop year, RMA has updated the flue cured tobacco insurance program with two major changes.

    The first change is there will be two price elections for flue cured tobacco. Tobacco grown under a valid contract from a processor or manufacturer will receive one price, while tobacco grown without a valid contract will receive a different price. Producers with a valid contract who choose to grow more tobacco than they have contracted will receive a weighted average price for all their insured tobacco.

    The second change is the amount of flue cured tobacco eligible for quality adjustment will be limited to the amount of tobacco grown under a contract.

  • Q Which kinds of tobacco are impacted?

    These changes apply to flue cured tobacco, in all states where the crop is grown.
  • Q Why did RMA make these changes?

    RMA, along with representatives from the flue cured tobacco industry have worked on this change for several years. There were concerns from USDA, program participants and other stakeholders about program integrity, the long-term sustainability of the program, and about the program negatively impacting the market for flue cured tobacco. These changes are designed to address those issues, while still providing a useful risk management safety net to flue cured tobacco producers.
  • Q Why is RMA valuing contracted flue cured tobacco differently from non-contracted flue cured tobacco?

    RMA has found through program reviews, and supported by feedback from stakeholders, that the marketing of flue cured tobacco grown under contract is different from the marketing of flue cured tobacco not grown under contract. Contracted tobacco of the same quality and leaf position typically receives a higher market price. RMA will reflect that in our price elections going forward.
  • Q What if I don't have a contract?

    If a producer does not have a valid contract, their entire tobacco crop will still be insurable. These producers will have the crop valued at the non-contracted price election. However, they will not be eligible for any quality adjustment on their crop.
  • Q What if I have a contract for some of my flue cured tobacco, but not all of it?

    Producers with a valid contract from a processor or manufacturer for a portion of the flue cured tobacco they expect to grow will receive a weighted average price election. This price election will be applied across all flue cured tobacco grown by that producer, and based on their reported acreage, their production history, and the amount of flue cured tobacco they have contracted.
  • Q How do I know if my contract is valid?


    A valid contract for crop insurance purposes is a written agreement between you and a processor or manufacturer of tobacco, containing at a minimum:

    • Your commitment to produce tobacco on your farm operation during the insurance period and deliver the production to the processor or manufacturer,
    • The processor or manufacturer’s commitment to purchase the tobacco stated in the contract; and
    • The total number of pounds of tobacco to be delivered.
  • Q What determines if an entity can issue a valid contract?

    To issue a valid contract a company must be legally authorized to manufacture processed tobacco and/or tobacco products, and must have all required state and federal permits, including a permit as a manufacturer of tobacco products or processed tobacco under 26 U.S.C. Chapter 52. Federal permits are issued by the Alcohol and Tobacco Tax and Trade Bureau. Depending on the state in which they are located, a processor or manufacturer may need to meet additional permitting or licensing requirements.
  • Q How do I know if my contract is with an approved buyer?

    When entering into a contract to grow flue cured tobacco, if producers are uncertain whether the buyer is a processor or manufacturer, they should check that the company has all required permits for processing or manufacturing tobacco. If the company does not possess these permits, flue cured tobacco contracted with that company will not receive the price election for contracted flue cured tobacco or be eligible for quality adjustment.
  • Q How will my contract impact quality adjustment on my tobacco?

    A producer will be eligible for quality adjustment on as much tobacco as they have covered under a valid contract.
  • Q What if I grow flue cured tobacco under someone else’s contract?

    A contract issued to another entity will not be considered valid for the purposes of crop insurance, even if it is from a permitted processor or manufacturer. The contract must be issued to the insured entity.
  • Q What if I grow flue-cured tobacco under a valid contract and later sell some or all my crop to another entity instead of the original contract provider?

    That decision would not have an impact on a producer’s crop insurance.
  • Q What if I grow flue-cured tobacco under a valid contract and the contract provider discontinues accepting contracted leaf before the end of the season for any reason other than poor leaf quality?

    That decision by the processor or manufacturer would not have an impact on the validity of the contract or the crop insurance guarantee for the producer. However, that would not constitute an insurable cause of loss for the producer.
  • Q How will the blended price election mechanism work for flue cured tobacco?

    If a producer has contracts for 100,000 lbs of flue cured tobacco, and based on their planted acreage and historical production history, they expect to produce 120,000 lbs of tobacco in the crop year, their price election would be calculated by multiplying 100,000 lbs by the contracted price election of $1.80, 20,000 lbs by the non-contracted price election of $.90, and summing these two figures. The sum would then be divided by 120,000. In this example, this would result in a price election of $1.65 applied across all of the producer’s units. If a producer plants conventional and organic tobacco, the price elections would be calculated separately.