What Effect Will New Law Have on U.S. Grain Companies?
A new provision in the federal tax code passed in December has U.S. privately held grain handlers and ethanol producers concerned.
Championed by senators John Thune of South Dakota and John Hoeven of North Dakota, the provision will give farmer-owned cooperatives a market advantage and may make it challenging to privately held grain companies such as ADM, Bunge, and Cargill looking to source grain or oilseeds.
The last minute provision to the bill provides a sizable cut to the taxes imposed on proceeds from agricultural products that farmers and ranchers sell to farm cooperatives, with no equal provision for ag products sold to private companies. Estimates are that such a provision will give farmers selling to co-ops five times the advantage versus selling to a privately held company.
The measure could provide a significant boon to growers and the remaining 1,953 farmer, rancher, and fishery co-ops in the U.S., however the country’s private handlers fear that the new law will result in their grain and oilseed supplies drying up.