For tobaccos other than flue-cured and burley, acreage allotments are used to restrict production. The result is the effective quota, i.e., the actual amount that the farm is allowed to market. Producers who exceed acreage allotments or quotas for tobaccos under marketing quotas are subject to penalties. The penalty rate is 75 percent of the previous year's average market price. To participate in the program, the grower must adhere to a number of restrictions and rules.
Rules vary by State and by kind of tobacco.
Farmers must own land, or purchase or rent land that has a quota. At the auction, each lot of tobacco goes to the highest bidder unless that bid does not exceed the government's loan price. The cooperative, acting as an agent of the CCC, later sells the tobacco, with the proceeds going to repay the loan plus interest. Price supports . Costs do include general variable costs, but exclude costs of land, quota, risk, overhead, management, marketing contributions or assessments, and other costs not directly related to tobacco production.