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The tobacco price support program uses a combination of marketing quotas and nonrecourse loans to keep prices stable and higher than they would be otherwise. The marketing quotas limit production in order to raise prices. Nonrecourse loans allow producers to hold tobacco stocks for long periods in order to balance supplies with market demand conditions. By law since 1982, tobacco loan program operations are required to function at no net cost to taxpayers. A no net cost assessment is collected on all leaf tobacco sold to build a reserve fund that reimburses the Commodity Credit Corporation for any losses of loan principal and interest.

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