Midwest Beckons Tech Investors

Steve Lohr reported earlier this week at The New York Times Online that, “They seem an odd couple. J. D. Vance, author of ‘Hillbilly Elegy,’ his best-selling memoir of growing up in the postindustrial Midwest and his journey of escape. And Steve Case, the billionaire co-founder of America Online.

“But Mr. Vance joined Mr. Case’s investment firm this year to scour the Midwest for small yet promising start-ups, particularly for a new seed fund. The firm, Revolution, plans to raise up to $100 million for that fund’s investments, it disclosed in a filing last month with the Securities and Exchange Commission.

They are by no means the only notable investors seeking opportunity in the region.”

The Times article stated that, “Four years ago, Mark Kvamme, a top venture capitalist in Silicon Valley, left the heart of the tech industry to become a tech investor here in the Midwest heartland.

“After a slow start, his firm has raised $550 million and invested in 26 companies. Its bet is that the middle of America amounts to an undervalued asset, rich in markets, new business ideas and budding entrepreneurs. The Midwest, the thinking goes, is not only untapped, but also an antidote to the scalding-hot tech market on the West Coast.”

Mr. Lohr explained that, “But some investors, led by people like Mr. Kvamme and his firm, Drive Capital, see plenty of potential in the center of the country. Focusing on the Midwest is no longer considered a nutty idea, as it was by skeptical West Coast venture capitalists when Mr. Kvamme and Chris Olsen, another Silicon Valley transplant from Sequoia Capital and co-founder of Drive Capital, made the move in 2013.

Every major Midwestern city now has clusters of start-up accelerators and incubators, typically housed in renovated red-brick industrial buildings.”

This week’s article also indicated that, “The rationale for investing in the Midwest combines cost and opportunity. A top-flight software engineer who is paid $100,000 a year in the Midwest might well command $200,000 or more in the Bay Area. The Midwest, the optimists say, also has ample tech talent, with excellent engineers coming out of major state and private universities in the region.

“But they also point to technology shifts. As technology transforms nontech industries like health care, agriculture, transportation, finance and manufacturing, the Midwest investors argue that being close to customers will be more important than being close to the wellspring of technology.”

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USDA Organic Rule Delayed- Impact on Organic Egg Production

Geoffrey Mohan reported on the front page of the business section in today’s Los Angeles Times that, “In early November, the USDA quietly shelved a rule that would have given consumers a bit more of what they assume is part of organic eggs — open air.

“Agriculture Secretary Sonny Perdue (who is not related to the chicken family) left open a loophole in organic regulations that has allowed factory egg farms, some with 100,000 hens to a barn, to earn an organic imprimatur without much more than a nod to letting chickens leave their coop — that is, attaching a gated, screened porch to their barns.”

“USDA leaves open ‘organic’ loophole,” by Geoffrey Mohan. Los Angeles Times (November 21, 2017).

“It was the third delay for the obscure but highly contentious rule, which had made it into the Federal Register on the day before President Trump took the oath of office, only to fall victim to his ‘regulatory freeze’ executive order.”

The article noted that, “Organic eggs now fill the refrigerators of big-box stores such as Costco and Wal-Mart. Most of those eggs come from the titans of the egg industry, such as Herbruck’s Poultry Ranch in Michigan and Mississippi-based Cal-Maine.

“Those and other egg farms have built their facilities around a 2002 ruling by USDA that allowed farms to attach a screened porch to a chicken barn and qualify it as ‘outdoor space’ under the organic rules. At least a third of organic egg producers operate under that model, according to USDA.”

Mr. Mohan noted explained that, “USDA has said it would cost the industry $8 million to $30 million over about 15 years to comply with the revised organic rules. Consumers would pay an additional 21 to 50 cents per dozen eggs, the agency estimated. (The agency said benefits of the change, including increasing the willingness of consumers to pay more for the certified eggs, are worth $4 million to $50 million.)”

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Monsanto Seeks Halt to Dicamba Ban in Arkansas

Associated Press writer Andrew DeMillo reported on Friday that, “A major agribusiness company asked an Arkansas judge Friday to halt the state’s plan to ban an herbicide that’s drawn complaints from farmers across several states who say the weed killer has drifted onto their fields and caused widespread damage.

Monsanto asked a Pulaski County judge to strike down the rule approved by the state Plant Board earlier this month that would prohibit the use of dicamba from April 16 through Oct. 31. The ban is expected to go before a legislative panel next month, but the Missouri-based company said action is needed now because farmers are already buying their products for next year’s growing season.

“‘The ban severely curtails Monsanto’s ability to sell its new dicamba-tolerant seed and low-volatility dicamba herbicide within the state, and every day the ban remains in place costs Monsanto sales and customers,’ the company said in its filing.”

The AP article noted that, “The request to halt next year’s ban was added to a lawsuit Monsanto filed last month over the board’s decision in 2016 to prohibit the use of dicamba.

“In its amended lawsuit filed Friday, the company argued the Plant Board exceeded its authority by banning dicamba and did not consider the financial impact on the state’s farmers. Monsanto said it would ask the court to move quickly on its complaint, and hoped the board would join in that request.”

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Missouri Limits Dicamba Use

Reuters writer Tom Polansek reported on Friday that, “Missouri will limit the use of a weedkiller made by BASF SE after farmers complained the chemical drifted and harmed their crops, following a move by Arkansas to prohibit spray applications next year of the herbicide and rival products.

“Missouri on Thursday banned sprayings of BASF’s Engenia herbicide, which is based on a chemical known as dicamba, in 10 counties that had high numbers of complaints about crop damage, starting on June 1, 2018. The ban will expand statewide on July 15 and end in October.

“Missouri said it expects to impose similar bans on dicamba herbicides sold by Monsanto Co. and DowDuPont Inc.”

Mr. Polansek added that, “Missouri received about 310 complaints from growers related to dicamba, second only to the nearly 1,000 filed in Arkansas.”

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House Passes Tax Reform Measure, Attention Turns to Senate Finance Committee

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “The House of Representatives on Thursday voted to approve a nearly $1.5 trillion tax overhaul bill. The bill passed with a 227-to-205 vote.

“President Donald Trump traveled to Capitol Hill ahead of the House vote Thursday morning to urge House Republicans to approve the measure.

The bill would cut the corporate tax rate from 35% to 20%, a level set early in the debate over tax reform. Businesses would get immediate expensing of capital costs, but business interest would be limited and other tax deductions and tax credits would go away.”

The DTN update noted that, “Attention now turns to the Senate Finance Committee, which continues working on its tax overhaul bill. The Senate will eventually be the chamber to watch on tax reform, because Republicans hold a slim majority. Some Republican senators have already panned the tax-reform bill because of the impacts on the annual budget deficit and long-term federal debt. Sen. Ron Johnson, R-Wis., became the first GOP senator to officially oppose the bill on Wednesday. Johnson told the Wall Street Journal the bill favors corporations too heavily over other types of businesses.”

Mr. Hagstrom added that, “Under the House bill, farmers could still deduct property taxes as a business expense, but the deduction for home property taxes and state income taxes would be limited to $11,000.

“The Senate bill also would allow a deduction for business property taxes, but eliminates the deduction for home property and state income taxes.”

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Iowa State University Extension Update on Tax Reform

Earlier this week, Kristine A. Tidgren provided an interesting recap and summary of some parts of the tax reform proposals currently being considered by lawmakers in Washington, D.C.

The update, “Tax Reform: What’s on the Table,” was posted at the Iowa State University (ISU) Extension Center for Agricultural Law and Taxation webpage.

A variety of topics are covered in the ISU summary, but with respect to the estate tax, Ms. Tidgren noted that, “House: The House proposal would initially double the basic exclusion amount allowed for each person. Under this proposal, every person could die with up to $11.2 million in assets in 2018 and owe no estate tax. Portability would continue to allow a deceased spouse’s unused exclusion to be used by the surviving spouse. In other words, if both spouses were to die in 2018, they could exclude up to $22.4 million in property from the estate tax.

Under the House plan, the estate and generation-skipping tax would be repealed altogether beginning in 2024. The gift tax would remain, although the higher exclusion amounts would apply. Most significantly, the House proposal would retain the current basis adjustment at death. This allows heirs to receive appreciated assets with the basis adjusted (usually stepped-up) to current fair market value.

Note: In 2016, there were only 5,219 estate tax returns filed for taxable estates. Only 682 of those taxable estates had any farm property (2% of total taxable assets).

Senate: The Senate proposal would also double the basic exclusion amount and retain the step-up in basis. The Senate plan, however, would not repeal the estate tax and generation skipping tax for estates valued greater than the increased basic exclusion.”

This week’s ISU update also noted that, “The most costly change in both proposals is to lower the maximum corporate tax rate from 35% to 20%. The House proposal would implement this change beginning in 2018. The Senate plan would delay the reduction until 2019. Reducing the corporate tax rate over a 10-year period would cost nearly $1.5 trillion.”

And Ms. Tidgren pointed out that, “Both proposals would retain IRC §1031 like-kind exchange treatment for real property, but eliminate it for personal property, such as farm equipment or breeding heifers. The proposals also eliminate the domestic production activities deduction (DPAD), which is frequently used by agricultural producers, beginning in 2018.”

The full Iowa State University update is available here.

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Bee Health: Fungicides Emerge as Improbable Villain

A Cornell University update yesterday by Blaine Friedlander stated that, “When a Cornell-led team of scientists analyzed two dozen environmental factors to understand bumblebee population declines and range contractions, they expected to find stressors like changes in land use, geography or insecticides.

Instead, they found a shocker: fungicides, commonly thought to have no impact.

“‘Insecticides work; they kill insects. Fungicides have been largely overlooked because they are not targeted for insects, but fungicides may not be quite as benign – toward bumblebees – as we once thought. This surprised us,’ said Scott McArt, assistant professor of entomology and the lead author on a new study published Nov. 15 in the journal Proceedings of the Royal Society B.”

Yesterday’s update explained that, “While science has studied insecticides, such as neonicotinoids, that attack bugs’ central nervous systems, this new work shows how fungicides – particularly chlorothalonil, a general-use fungicide often found in bumblebee and honeybee hives – may negatively affect bee health, said McArt, a fellow at Cornell’s Atkinson Center for a Sustainable Future.

“Building on a large data set collected by Sydney Cameron, professor of entomology at the University of Illinois, the scientists discovered what they call ‘landscape-scale’ connections between fungicide usage, pathogen prevalence and declines of endangered United States bumblebees. (Landscape scale refers to the area in which foraging bumblebees live, about 2 kilometers in diameter.)

“While fungicides control plant pathogens in crops, the bees pick up their residue when foraging for pollen and nectar. As farms use both insecticides and fungicides, the scientists worry about synergy. ‘While most fungicides are relatively nontoxic to bees, many are known to interact synergistically with insecticides, greatly increasing their toxicity to the bees,’ McArt said.”

The Cornell update also pointed out that, “For domestic and global agriculture, bumblebees are a key component due to their ability to use ‘buzz pollination’ that vibrates and shakes pollen loose from flowers. In the United States, bees contribute more than $15 billion to the economy and $170 billion to global agribusiness, according to global economic research and a 2012 Cornell study.”

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EPA Seeks Delay in Emissions Rule For Livestock Producers

DTN writer Todd Neeley reported earlier this week that, “With a new livestock emissions reporting rule set to take effect on [November 15], the U.S. Environmental Protection Agency asked a federal court to stay the rule to allow the agency to help farmers prepare to comply.

“Back in April, the U.S. Court of Appeals for the District of Columbia Circuit threw out an EPA decision to not require livestock operations to report emissions, essentially allowing the reporting rule to take full effect on Nov. 15, 2017. The rule requires livestock producers to report emissions of more than 100 pounds per day of either ammonia or hydrogen sulfide.

“Animal feeding operations that confine more than 1,000 head of cattle, 2,500 head of hogs, or 125,000 chickens are defined as concentrated animal feeding operations, or CAFOs, by EPA. Ammonia and hydrogen sulfide emitted from livestock lagoons have been classified as ‘hazardous’ and ‘extremely hazardous.'”

Mr. Neeley indicated that, “The National Pork Producers Council and the U.S. Poultry and Egg Association filed court briefs last week in support of the EPA’s request to delay the mandate in the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA.

“The EPA asked the court on Monday for an extension of the deadline to either Jan. 17, 2018, or later to allow the agency to draft a better reporting form for farmers to use for compliance.

“A number of environmental groups led by the Waterkeeper Alliance asked the court to deny the agency’s request for an extension, calling the request a ‘smokescreen’ to further delay the rule.”

The DTN article noted that, “The University of Illinois Extension has developed a table to help livestock producers know whether they’ve reached reporting thresholds, http://web.extension.illinois.edu/…. In addition, the EPA has provided guidance for producers as well, http://bit.ly/….”

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Bill Would Curb Citizen Lawsuits Against Farmers

DTN Ag Policy Editor Chris Clayton reported late last week that, “A House Subcommittee on the Environment and Commerce held a hearing Thursday on a bipartisan bill to reduce the risk of farmers from citizen-led lawsuits.

The Farm Regulatory Certainty Act has more than 60 co-sponsors, and was spearheaded by Rep. Dan Newhouse, R-Wash., and Rep. Jim Costa, D-Calif. Newhouse, a former Washington ag director, told the subcommittee about a Washington state dairy farmer who were operating under state nutrient management plans, but entered into a consent decree with EPA. Then a third party got records on the dairy and it was sued under an environmental act.

“‘Our farming communities need to know the rules of the road. They need to have as much certainty as they can,’ Newhouse said.”

Last week’s article stated that, “Further, farmers should be encouraged to be proactive and work with regulators that won’t cause farmers to be subject to third-party lawsuits, he said.

“This legislation would not prevent EPA from applying regulations under Safe Water Drinking Act, Clean Water Act or other laws. But the bill would protect farmers who are trying to do the right thing by working with state or federal regulators on nutrient-management issues.”

Mr. Clayton added that, “Dan Wood, executive director of the Washington State Dairy Federation, told the subcommittee that dairy farmers are regulated on both state and federal levels. Farmers should not be subject to citizen lawsuits if the farms are already working with regulators, he said. ‘But that’s exactly what happened in the Yakima valley in Washington State two years ago,’ Wood said.”

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Hydroponics, Aquaponics Not “Organic,” Some Say

Associated Press writer Lisa Rathke reported today that, “Can a tomato grown in a nutrient solution instead of dirt be called ‘organic‘? Some purists don’t think so.

“The National Organic Standards Board, which advises the U.S. Department of Agriculture, voted this month against a proposal to exclude hydroponics and aquaponics — the raising of plants without soil and fish using the same water — from the USDA’s organic certification program.

“Many traditional organic farmers and their supporters say allowing hydroponic farms to be certified organic erodes the integrity of the $16 billion U.S. organic produce industry.”

The AP article indicated that, “To them, organic farming is about far more than not using toxic pesticides; it’s rooted in enhancing the fertility of soils, a concept developed in the early 20th century by pioneering organic farmers. Organic farmers worked hard to create the National Organic Program in 2000, an achievement they say is now being watered down by allowing hydroponic farms to be part of it.”

Ms. Rathke added that, “Marianne Cufone, executive director of the Recirculating Farms Coalition, which represents hydroponic and aquaponic farmers, said the law left room for the meaning of organic to expand. She said she was shocked that so many people opposed hydroponic and aquaporin farming from being labeled as such.”

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