Tax Reform: Much of the focus this fall has been on the tax reform bill as it makes dramatic reforms to lower corporate taxes and remove a number of personal deductions. Section 199, or the Domestic Production Activities Deduction (DPAD), was eliminated in both the House and Senate tax bills. The DPAD is calculated as 9% of qualified production activities income of the taxpayer (in our case, the cooperative), capped at 50% of cumulative W-2 wages of cooperative employees. Cooperatives can retain it at the cooperative and use it for capital improvements or pass the deduction through to their members. Section 199 is especially valuable to the grower-owners of cooperatives because their share of the cooperative’s DPAD is based off their share of the total beet payment (or patronage) paid to growers, not corporate profits. It is likely that without this deduction, grower taxes could go up--not down. Senator Hoeven (R-ND) led the charge to amend the Senate tax bill to retain Section 199 and had the support of 194 organizations, and eight senators cosponsored the amendment. But the amendment faced a budget point of order which would have required a 60-vote margin instead of a simple majority to gain Senate approval, so the amendment was not offered.
Agriculture and Congressional leaders understand this problem and will look to the conference, where the House and Senate bills are reconciled into one bill, to see what can be done to address the problem. With the tax bill already $100-$150 billion over budget per year, it is not easy getting $2 billion back in deductions for farmer cooperatives. Our industry will work tirelessly to reduce the impact of this problem during the month of December.
PAYGO: A second problem that resulted from the tax reform package is a “PAYGO” (“pay as you go”)--if deficits are going to be created in one bill, offsets have to come from discretionary funding in other government programs. That could wipe out funding for much of the support for farm programs in the Farm Bill. There have been assurances by both the House and Senate leadership that the “PAYGO” would be waived, as it has been 29 times before.
Crop Insurance: The Risk Management Agency (RMA) at USDA announced that the price election for beet sugar for the 2018 crop will be $48.25 per ton. It was also announced that the replant coverage for next year’s crop will be at a rate of $110 per acre, which is up from $80 per acre. This is a result of your grower leaders working with RMA to make the adjustments to reflect higher replant costs.
2018 Farm Bill: The House Agriculture Committee is preparing for the consideration of the new Farm Bill. Most of the drafting of the bill will be completed by late December, with hopes to move on the bill early next year. All of this hinges on how the end of this session of Congress concludes by December 31.
As usual, there will be a very bruising battle over sugar policy. The “Sugar Policy Modernization Act of 2017,” proposed by sugar user-based members in Congress, would devastate the domestic sugar industry. The bill has 48 cosponsors in the House (H.R. 4265) and 18 in the Senate (S. 2086). It would reduce the loan rate by 1 cent per pound, move from a recourse loan to a non-recourse loan--which effectively eliminates a support level, keep stocks at 15.5%--which oversupplies the market and depresses prices, repeal marketing allotments and eliminate the Feed Stock Flexibility Program that allows USDA to take preemptive action to avoid massive forfeitures and dispose of surplus sugar as quickly as possible for non-food uses. These elements, either as a package or individually, would be very harmful to our industry.
Biotechnology: Proposed rules for mandatory disclosure regulations are expected to be published by late January or early February. This is extremely important for our industry, as well as for other biotech crops and products derived from those crops. For the past year the beet sugar industry has been a leader in making sound recommendations to the USDA. Once the proposed rule is published, we will have another opportunity to submit our views to defend those proposals that we agree with and suggest changes in those proposals we disagree with. The final rule is supposed to be completed by July 29, 2018, so a great deal of work by both the government and industry will be needed between now and then.
Beet Crop: Preliminary reports are that we will have 35.8 million tons of beets harvested from the 2017 crop. They were harvested in good condition and hopefully have good storage conditions this winter. Warm weather is always a threat.
Mexico: The amended suspension agreements with Mexico agreed to in June went into effect on October 1st. Publically-published market prices for refined sugar are now recovering and should impact the 2018 beet sugar crop, which is welcome news for all beet growers. We now must make sure the agreement is properly monitored, implemented and enforced.
NAFTA 2.0: Negotiations between the U.S, Canada and Mexico will continue at least through some time period next year. Predicting negotiating time periods is always uncertain, but we are constantly monitoring the progress of the talks. The Mexican presidential election (July 1) is a major political driver to conclude negotiations before then.
2018 ASGA Annual Meeting: Information on the Annual Meeting and hotel reservations at the JW Marriott hotel in Washington, DC, February 4-6, can be found at www.americansugarbeet.org Please make your hotel reservations soon—our room block closes on January 3. If you are interested in a White House or U.S. Capitol tour, contact your House member (U.S. Capitol switchboard: 202-225-3121).
Thank you: My mother, two sisters and I want to express my deepest appreciation for the support of growers across the country when my father passed away on November 19th at the age of 94. He was married for over 70 years and had six children of which three preceded him in death. Among many leadership roles in his church and community, he was a sugarbeet 4-H leader for 30 years, an officer of the local growers association and served on the ASGA Board for a few years. He always said that beet farmers were the nicest and best farmers in the country. Oh, how right he was! I have been blessed many times over to be his son and help lead his beloved industry.
Luther Markwart, author of Dateline Washington, is executive vice president of the American Sugarbeet Growers Association.