Rick Barrett reported last week at the Milwaukee Journal Sentinel Online that, “You’re in the dairy state. You go to the store and buy some organic milk. You have this image of a small farm somewhere in rural Wisconsin, maybe one of those cool little towns in the Kickapoo Valley.

“But it could be from a big farm. A really big farm. In Texas.

“Yes, Texas.

“Wisconsin’s organic dairy farmers are getting squeezed by mega-sized farms that may have more than 100 times as many cows. And while some in Wisconsin claim their oversized brethren aren’t playing by the rules, for the most part, government regulators have dismissed the complaints.”

Mr. Barrett noted, “But as the organic market has become saturated, with milk from some very large farms flowing across state lines, some farmers say they’ve lost about 30% of the price they received a couple years ago.

“‘That’s right off the top, even as our expenses continue to go up,’ said Jim Goodman, an organic dairy farmer in Wonewoc, about 70 miles northwest of Madison. ‘The growth is in the big farms, like in Texas. You don’t see a lot of small organic dairy farms starting up these days.’

“He and other Wisconsin dairy farmers say the big operations aren’t following the USDA rules that call for a minimum amount of grazing for organic cows and for the use of certified organic grain.”

An update last week by Kristine A. Tidgren, at the Iowa State University “Ag Docket” Blog, stated that, “President Trump signed the Consolidated Appropriations Act, 2018, H.R. 1625, on March 23, 2018. At the end of the 2,232-page legislation, Congress included a section written to ‘fix’ the ‘grain glitch.’ This is, of course, the provision in the Tax Cuts and Jobs Act that provided significantly higher tax deductions (in most cases) to patrons who sold commodities to cooperatives rather than to non-cooperatives. You can read more detail about the original provision here.

“The 17-page ‘fix,’ while attempting to level the playing field, adds even more complexity to an already convoluted section of the new tax law, IRC § 199A. The fix retroactively takes effect, beginning January 1, 2018. This wipes from existence the provision giving cooperative patrons a 20-percent deduction based upon gross sales.”

The ISU update explained that, “Under the fix, the tax benefit to farmers who sell grain, for example, to a non-cooperative does not change. They are generally entitled to the new 20 percent 199A deduction, calculated based upon their net income from the sale. Their overall 199A deduction is limited to 20 percent of taxable income (minus capital gains). It is also restricted by a wages/capital limitation if their income exceeds $157,000 for singles and $315,000 for those who are married filing jointly.

“The fix completely changes, however, the tax benefit offered to patrons who sell grain, for example, to their cooperative. Instead of the 20-percent deduction calculated based upon their gross sales, the cooperative patron is subject to a new bifurcated calculation and a hybrid 199A deduction. Essentially, the fix gives the cooperative patron a deduction that blends the new 199A deduction with the old 199 DPAD deduction (all within the new 199A).* Depending upon their individual situations, cooperative patrons may be advantaged, disadvantaged, or essentially treated the same by selling to a cooperative rather than selling to a non-cooperative. While the significant advantage is gone, the complexity certainly is not.”

Last week’s update added that, “First, patrons calculate the 20 percent 199A deduction that would apply if they had sold the commodity to a non-cooperative. But they don’t stop there. The patron must then subtract from that initial 199A deduction amount whichever of the following is smaller:

• 9 percent of net income attributable to cooperative sale(s) OR
• 50 percent of W-2 wages they paid to earn that income from the cooperative

“But we are still not done. Once that amount is backed out, patrons get to add an additional ‘DPAD-like’ deduction (if any) passed through to them by the cooperative. The determination of the amount of this new ‘DPAD-like’ deduction, which can range from 0 to 9 percent of the patron’s sales to the cooperative, is at the discretion of the cooperative, based upon a patron’s share of business. It is governed by language copied directly from the old DPAD provision. In any event, the overall amount a cooperative can choose to pass through to its members cannot exceed 50 percent of the value of the wages the cooperative pays to its employees.The farmer’s deduction cannot exceed taxable income (subtracting the 20 percent QBI deduction detailed above, but not subtracting capital gain).”

* “It should be remembered that the 199A deduction only applies to pass-throughs and sole proprietors. Talk of a ‘DPAD-like’ deduction does not mean that corporations are now eligible for this deduction.”

The complete ISU “Ag Docket” update is available here.

A news release on Thursday from Rep. Neal Dunn (R., Fla.) stated that, “[Rep. Dunn] and Jimmy Panetta (CA-20) teamed up to eliminate unnecessary trade barriers that are hurting American exports and hindering innovation and advances in agricultural production technologies, including biotechnology. The Growing American Food Exports Act amends the Food, Agriculture, Conservation, and Trade Act of 1990 to update a USDA Foreign Agricultural Service program that funds efforts to harmonize international reviews of agricultural production technologies, which will lead to a stronger export economy and trade relations for the United States.

“Approximately one third of all U.S. agricultural exports, roughly $40 billion, are produced with or contain products of genetic engineering. These products face significant regulatory barriers in overseas markets and currently there is no single international standard-setting body to help normalize trade.

“The Growing American Food Exports Act addresses these top trade priorities:

• Maintaining and expanding access in major markets
• Advancing trade-facilitating solutions to inadvertent Low-Level Presence (LLP) of genetically engineered products approved in the United States, but not in foreign markets
• Promoting trade- and innovation-friendly policies globally for emerging technologies
• Building international coalitions for global acceptance of U.S. crops and predictable, science-based regulations.”

A news release on Thursday from Sen. Cory Booker (D., N.J.) stated that, “Today, [Sen. Booker] and Mike Lee (R-UT) introduced the Environmental Quality Incentive Program (EQIP) Improvement Act, a bipartisan bill that would reshape EQIP to be more efficient and effective.

“Started in 1998, EQIP is a voluntary conservation program in the Farm bill that provides farmers and ranchers with federal cost-share grants to implement environmentally-beneficial conservation practices on working agricultural land.

“Despite this worthy goal, analysis of EQIP between 2009 and 2016 showed that  just 14 percent – or $600 million – of all EQIP funding went towards certain conservation practices that the U.S. Department of Agriculture (USDA) identifies as producing significant environmental benefits. In contrast, more than $1 billion – or more than 20 percent of EQIP funds – was spent on infrastructure practices that produce relatively little environmental benefit. The EQIP Improvement Act would address this imbalance by readjusting funding to prioritize conservation practices with significantly greater environmental and water quality benefits.”

The release noted that, “Specifically, the EQIP Improvement Act would do the following:

·      Reduces from 75 percent to 40 percent the maximum federal cost-share for 25 practices that produce little environmental benefit.

·      Reduces the overall five-year EQIP payment cap from $450,000 to $150,000 to allow more small farmers to receive EQIP funding.

·      Ends an arbitrary requirement that 60 percent of EQIP funds flow to animal agriculture, giving more discretion to states to select the best projects for funding.

·      Requires USDA to prioritize practices that provide significant environmental benefits for water quality and soil health.”