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Growers and quota owners participating in the tobacco buyout have another option for receiving their payments up front.

"American Farm Bureau has identified Farm Bureau Bank as a third party to assist members with lump sum payments," said Bob Vance, OFBF vice president of corporate affairs.

Producers can choose to receive buyout payments over a 10-year period from the government or sign their payments over to the bank in return for a lump sum at a discounted rate. Producers can also use the payments as collateral for a loan.

"People should start looking into how they can best utilize this," said David White, OFBF director of commodity relations. White noted that producers may be able to better utilize a lump sum than payments spread out over 10 years. He said all entities offering lump sum payments must abide by Farm Service Agency (FSA) rules.

FSA requires that producers receive the 2005 payment from the government. After that, producers can choose to receive a lump sum payment during any year of the buyout period, given that it is for 100 percent of the remaining payments.

White explained that the maximum rate at which entities are allowed to discount the payments is the prime interest rate, plus 2, rounded to the nearest whole number. For example, if prime is 5.75 percent, entities could offer lump sum payments at a maximum discount rate of 8 percent.

Producers can access a discount rate calculator at the FSA Web site to determine what payment offers are acceptable.

Given a discount rate of 8 percent, a producer who was owed $10,000 could receive $1,000 from the government this year and a lump sum of approximately $6,500 in 2006.

Producers will have until Nov. 1 to execute a Successor-In-Interest (SII) contract if they want to receive a lump sum the following year. SII forms will be made available on the FSA Web site by this fall.

White said producers who continue growing tobacco may want to use the payments as a safety net because the government price support program was eliminated as part of the tobacco buyout legislation signed into law last fall. Others may want to use the money to diversify away from tobacco production.

"The thing our members need to keep in mind as they make these decisions about loans or lump sum payments is their tax liability," he said.

For more information on Farm Bureau Bank's tobacco payment program, visit www.fbten.com or call 800-422-1062. To access FSA resources, including the lump sum calculator, visit www.fsa.usda.gov/tobacco/.