Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.Chinese Officials Want to Diversity Ag Import Countries
With China becoming more reliant on imported food, the Development Research Center's Dr. Ye Xingqing details a strategy in "Diversification of China’s Global Agricultural Supply System Inseparable from 'Belt-Road,'” which calls for China to nurture new suppliers of agricultural imports from "Belt and Road" countries.
Ye worries that China is exposed to risk by relying on a few countries in the Americas and Oceania for most of its agricultural imports, relying on a few maritime shipping lanes and relying on a handful of multinational grain-trading companies, which exposes China to potential risks. Dr. Ye recommends following previous advice by planning and guiding agricultural imports and diversifying suppliers, as Chinese investors abroad develop new supply chains.
Rumors Swirl over Funding For Ag If NAFTA Collapses
Questions about discussions within the Trump administration on potential funding for the agriculture industry if North America Free Trade Agreement (NAFTA) renegotiations fail were raised by Sen. Chuck Grassley, R-Iowa, to U.S. Trade Representative (USTR) Robert Lighthizer during a Senate Finance Committee meeting on Tuesday.
The questioning comes amid rumors that some administration officials have begun to put together a "pot of money" anticipating a NAFTA withdrawal and its effect on farmers. Grassley was expected to ask this and other questions regarding talks to renegotiate the North America Free Trade Agreement (NAFTA), including the status of the renegotiation talks.
Washington Insider: Farm Groups Disagree on Tax Bill's Impact
Bloomberg is reporting this week that two prominent farm organizations disagree over how the tax-bill compromise would affect the agriculture industry.
The American Farm Bureau Federation, which Bloomberg says “focuses on making the farming business more profitable,” supports the bill's potential for lower farmer income taxes. But the National Farmers Union focuses on the possibility that “the tax cuts could threaten programs like crop insurance in the 2018 farm bill, as lawmakers struggle to offset the $1.5 trillion that the overhaul would add to the national debt over 10 years.”
The Tax Cuts and Jobs Act is projected to add $1.455 trillion to the U.S. deficit over the next decade, according to a report released on Dec. 15 by the nonpartisan Congressional Budget Office. CBO says the final bill would reduce U.S. revenue by about $1.649 trillion and decrease outlays by about $194 billion over period from 2018 to 2027.
The bill would provide a 20% deduction for owners of pass-through businesses. With the majority of farms structured as pass-throughs, this could “help them have more profitable businesses and allow them to immediately deduct expenses,” Patricia Wolff, tax policy specialist at AFBF, told Bloomberg.
Wolff also endorsed the bill's expansion of the tax code’s section on small business expensing, and the extension of unlimited immediate expensing.
Under current law, farmers and ranchers are allowed to deduct as much as $500,000 worth of new asset purchases over many years. The new legislation would increase that deduction to $1 million and allow it to apply to new and used purchased assets. The provision would reduce revenue by $11.4 billion in fiscal 2019 compared to fiscal 2018, according to the Joint Committee on Taxation.
“It's important that a farmer can take an expense immediately rather than having to deduct an expense over a number of years,” Wolff said.
The National Farmers Union told Bloomberg that its biggest concern with the bill is the increase to the national debt and the possible cuts to agriculture programs in the next farm bill. The current Act is set to expire at the end of the 2018 fiscal year.
“I don't know how the agriculture industry gets better if we have to deal with the deficit,” Zack Clark, NFU's director of government relations, told Bloomberg.
Clark also said the industry doesn't need tax code’s proposed increase to $1 million for asset purchase deductions and the tax cuts for high-income earners, saying those provisions are “problematic” for the middle class.
“They're getting to levels that, even if it was good times for our producers, they wouldn't be using it,” he said.
Another provision in the bill that concerns Clark would repeal the “carryback” rule. Under current law, if farmers’ net operating loss exceeds current-year gross income they can “carry back” their losses to the previous five years to offset profits.
Farmers often rely on the carryback for net operating losses; repeal of the provisions from five years to two years would impact farmers’ cash flows.
AFBF's Wolff said now the concern is that the provisions are only temporary.
“The bill is very positive the way it is written but provisions need to be permanent in order for long-term benefit for farmers and ranchers,” she said. The organization plans to lobby Congress in January to make them permanent.
Agriculture Secretary Sonny Perdue expressed his support for the tax overhaul bill.
“Just like any business owner, American farmers need to turn a profit so they can grow their operations, create jobs, and feed their families,” Perdue said in a statement provided to Bloomberg. He praises the President for his support for the tax cuts and reforms, and Congress for its efforts regarding taxes.”
So, now as the tax fight enters its closing phases, Congress is gearing up to tackle even tougher problems regarding budgets and spending as a number of political promises that come due at the end of the year. Those include early efforts toward the mid-term elections, the 2018 phase of the NAFTA talks and the Farm Bill debate, certainly all fights producers should watch closely as they emerge.
Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.
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