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. The Secretary can set the price support between 65 and 100 percent of the calculated adjusted change from the previous year. This legislation imposes an assessment on every pound of tobacco marketed. The assessment funds are deposited in an escrow account that is held to reimburse the Government for any financial losses resulting from tobacco loan operations. Losses occur when a cooperative sells loan collateral tobacco at a price insufficient to cover the loan principal plus interest.