Washington Insider-- Monday
Cyberattack Shuts Down Key Pipeline
Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
House Democrats Join Those Concerned About Stepped-up Basis
The latest pushback from President Joe Biden's tax plans come from 13 House Democrats via a letter to Speaker Nancy Pelosi, D-Calif., and other House Democratic leaders asking for an exemption for family farms from the stepped-up in basis tax hit.
"The requirement to recognize capital gains at death runs the risk of forcing farms and ranches to sell part, or all, of a farm that may have been passed down for several generations in order to pay the tax burden," wrote the Democrats, who include some that are viewed as potentially being vulnerable incumbents.
According to the Penn Wharton Budget Model, estimates that raising the top capital-gains tax rate to 43.4% would shrink federal revenue by $33 billion over 10 years, a smaller hit than the Tax Foundation's projected loss of $124 billion.
To compensate, the Biden administration has proposed a $1 million cap on the "step-up in basis," which excludes unrealized gains from taxation at death. The Wall Street Journal labeled it a "backdoor death tax," and Penn Wharton estimates the change would raise up to $113 billion over a decade.
USDA pledged that the Biden plan included exempting agriculture from the capital gains/stepped up basis, but clearly those assurances are not enough for the Democratic lawmakers penning the letter to leaders. It also underscores the Biden tax plan faces potential issues ahead relative to having enough support. Based on history, the farm family carveout is likely the first of many requests ahead.
Beyond Meat Reports Loss on Slower Restaurant Sales
Beyond Meat reported a bigger loss in quarterly earnings than expected, sending shares in the company down 7% after the report. The company blamed sluggish sales to restaurants, increased freight and storage costs that dented the earnings picture.
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The company said slow sales had built up supplies of pea protein and that raised warehousing costs. The firm reported net revenue of $108.2 million in their first quarter that ended April 3, below expectations it would be nearly $114 million.
They registered a net loss of $26.8 million compared with a profit of $1.8 million one year ago.
Washington Insider: Cyberattack Shuts Down Key Pipeline
Politico is reporting that the pipeline system that feeds much of U.S. East Coast fuel supplies was shut down Friday as a cyberattack hit the Colonial Pipeline. The company said on Sunday it had no estimate on when it could restart the 5,500-mile pipeline that it shut Friday after a cyberattack.
The pipeline supplies about 45% of the gasoline and diesel that is consumed on the U.S. East Coast from the hub of refineries near Houston. It remains offline for now, the company said in a statement, though it restarted some smaller lines that run off the main arteries.
Prices for wholesale gasoline in the financial futures market jumped as much as 4% in Sunday evening trading to their highest level since 2018, the report said.
Colonial also confirmed that hackers used ransomware to shut down its internal computer business networks. That prompted the company to shut down the systems that control the pipeline as a precaution, and it has brought in third-party cybersecurity firms and is trying to restore its IT system, the Georgia-based company said, according to Politico.
"It's an all-hands-on-deck effort right now," Commerce Secretary Gina Raimondo said of the government's response during a Sunday television interview. "And we are working closely with the company, state and local officials to, you know, make sure that they get back up to normal operations as quickly as possible and there aren't disruptions in supply."
The trade group American Petroleum Institute said it was closely monitoring the pipeline situation and that cybersecurity is a top priority for the energy industry.
The Department of Transportation issued waivers on Sunday allowing fuel truck drivers in 17 states to work additional hours to try and supply products.
And several media outlets reported that a Russian group has links to the situation with CNN reporting that the Russian group "Darkside" is believed to be responsible for the ransomware attack.
The situation has exposed one of the biggest fears that is nearly unspoken -- the U.S. energy sector is one of the biggest potential targets for cyberattacks. The situation hinges on how long the pipeline stats shuttered.
And with the Memorial Day holiday ahead and U.S. drivers likely champing at the bit to break free of the pandemic even for a few hours, the cost of such an activity could be key.
While the situation unfolded Friday, there was little news that emerged on the situation until Saturday when major newswires were covering the matter.
So we shall see. The U.S. energy infrastructure is one that farmers also depend on. And with planting activity still ahead in some areas of the country, costs that are rising for fuel could become a factor that farmers will have to deal with in and that could create additional turbulence for the sector just at a time when prices were rising for their products.
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