The new U.S. bill gives farmers a big tax deduction for selling their produce to agricultural cooperatives. The changes mean massive grain traders such as ADM, Bunge and Cargill could find it difficult to source corn, soybeans and wheat.
The new U.S. tax law is poised to drive more control over the nation’s grain supply to farmer-owned cooperatives, provoking concern among ethanol producers and privately run grain handlers that they could be squeezed out of the competition to buy crops, Reuters reported. Until now, the cooperatives, private companies and publicly traded firms had a more even opportunity to handle the grain supply used in everything from loaves of bread in supermarkets to livestock feed. The changes mean massive grain traders such as Archer Daniels Midland Co, Bunge Ltd and Cargill Inc could find it difficult to source corn, soybeans and wheat.
The perceived threat to these companies stems from a provision included in the final stages of the law’s passage in December. It gives farmers such a big tax deduction for selling their produce to agricultural cooperatives that private firms fear their grains supply will dry up. The new tax law allows farmers and ranchers to claim a 20 percent deduction on all payments received on sales to cooperatives.
The deductions could come as a massive boon to cash-strapped U.S. grain farmers, who have struggled for at least four years amid a global grain glut and sluggish commodity prices, Reuters pointed out. Some farmers seeking to take advantage of the new deduction are already asking about transferring grain they have stored at private elevators and selling it to cooperatives.
The change focuses on a provision in the federal tax code that cuts taxes on proceeds from agricultural products – whether corn and soybeans, or milk and fresh fruit – that farmers and ranchers sell to farm cooperatives such as CHS Inc.