December 29, 2017
CapitalPress.com
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NCBA
mostly
pleased by
tax plan
By CAROL RYAN DUMAS
Capital Press
While cattle producers
didn’t get everything they
wanted from federal tax re-
form signed last week by
President Trump, they came
close.
The bill does not fully and
permanently repeal the estate
tax, but it does double exemp-
tion rates to $11 million for
individuals and $22 million
for couples, both indexed for
inflation.
Unfortunately, that provi-
sion was not made permanent
and the exemptions will revert
back to current levels in 2026,
said Danielle Beck, National
Cattlemen’s Beef Association
director of government af-
fairs.
But overall, the tax bill is a
really good package for cattle
producers, she said.
Cash accounting and ex-
pensing provisions are all be-
ing expanded, which is great
for business owners and par-
ticularly great for agribusi-
ness owners, she said.
NCBA was “very con-
cerned” with the initial House
bill that proposed restricting
interest deductions to 30 per-
cent of earnings before inter-
est, taxes, depreciation and
amortization, she said.
“That cap would have been
very detrimental for highly
leveraged agricultural enti-
ties. Particularly in the live-
stock sector, we’re looking at
feeders,” she said.
Cattle feeders take on sig-
nificant short-term debt to
purchase cattle at the begin-
ning of each finishing cycle
and finance the purchase of
feed and other input costs
necessary for raising cattle,
she said.
But an agreement in con-
ference negotiations allows
producers to continue deduct-
ing interest costs, she said.
The bill creates a
small-business exclusion ex-
empting entities with average
annual gross receipts over a
three-year period that do not
exceed $25 million from the
limit on interest deduction,
she said.
By NCBA’s calculations,
that exemption would gener-
ally apply to feedlots with less
than 5,000 head capacity.
Operations with gross re-
ceipts in excess of $25 million
can elect to deduct 100 per-
cent of interest expense but
in exchange for the exemp-
tion from the 30 percent cap,
they’ll have to give up the 100
percent bonus depreciation al-
lowed on all new farm assets,
she said.
Overall, those provisions
are a really good deal, she
said.
Those with gross receipts
under $25 million will be able
to continue deducting interest
expenses without having to
make any sort of election, she
said.
“And then for those out
there who do have quite a bit
of cash flow coming in and
out of their business each
year, they can still maintain
the ability to deduct interest
as a legitimate business ex-
pense,” she said.
The bill also increases the
eligibility threshold for cash
accounting from $5 million
average gross receipts to $25
million.
“Cash accounting allows
farmers and ranchers to im-
prove cash flow by recogniz-
ing income when it is received
and recording expenses when
they are paid,” she said.
Accrual accounting could
create a situation where they
would have to pay taxes on
income before receiving pay-
ment for sold commodities,
she said.
The bill also raises the sec-
tion 179 expense deduction
from $500,000 to $1 million
and is indexed to inflation.
The deduction allows a pro-
ducer to expense, with lim-
itations, a capital purchase for
business use instead of depre-
ciating the item over time.
7
Dairy/Livestock
EPA lowballs manure rule’s reach
Poultry industry
eyes $47.2 million
annual bill
By DON JENKINS
Capital Press
The Environmental Pro-
tection Agency has underes-
timated how many producers
will have to report that their
animals are releasing gas, ac-
cording to farm groups.
The new reporting re-
quirement, forced by an
environmental lawsuit and
expected to take effect Jan.
22, will apply to hundreds of
thousands of farms, not the
44,900 projected by the EPA,
the groups say.
“This number is woefully
inadequate and vastly un-
der-represents the universe
of producers who will be
impacted by these reporting
requirements,” the American
Farm Bureau Federation stat-
ed in comments to the EPA.
Farm groups submitted re-
marks this month as the EPA
took comments on exactly
what producers will have to
report to comply with the Su-
perfund act. The law requires
that chemical leaks be report-
ed to the National Response
Center staffed by the U.S.
Coast Guard.
Farm groups are pushing
for a one-page form that in-
cludes a disclaimer that pin-
pointing emissions is essential-
ly guesswork. Environmental
groups complain that the EPA’s
tentative reporting standards
aren’t tough enough.
The EPA estimates report-
ing will cost farms $14.9 mil-
lion year. The EPA based its
projection on the number of
farms affected on a 2008 cal-
culation, which has not been
updated.
USDA
Under the Superfund law, hundreds of thousands of farmers and
ranchers will have to report the amount of ammonia and hydro-
gen sulfide their cattle and poultry emit, according to farm groups.
The National Cattlemen’s
Beef Association said the rule
could apply to 68,313 beef
cattle operations alone.
The beef association
based its estimate on research
in Texas that suggests ranch-
es with as few as 208 head of
cattle will meet the threshold
for reporting ammonia and
hydrogen sulfide.
“This number far exceeds
EPA’s estimation, and cattle
are just one of the species
subject to his requirement,”
according to the beef associ-
ation.
The poultry industry es-
timates the rule could apply
to about 141,000 poultry
farms. Based on EPA cost
estimates, calculating and re-
porting emissions could cost
the poultry industry $47.2
million a year, according to
the U.S. Poultry and Egg As-
sociation.
The EPA sought to exempt
agriculture from the Super-
fund law. After years of liti-
gation, the D.C. Circuit Court
of Appeals ruled in April that
emergency responders should
be alerted to decomposing
manure.
The court gave the EPA
until mid-January to develop
a reporting form tailored to
agriculture.
The court has yet to make
a final ruling on whether
farms also will have to regis-
ter with state and local offi-
cials under a separate federal
law.
The reporting requirement
applies to operations that
emit at least 100 pounds of
ammonia and hydrogen sul-
fide in a 24-hour period.
Dairy prices wobble through the holidays
By LEE MIELKE
For the Capital Press
Cash dairy prices weak-
ened the week before Christ-
mas though cheese and pow-
der regained a little ground at
week’s end.
A somewhat bullish Milk
Production report may have
been partly responsible but
traders were also anticipating
the November Cold Storage
report.
CME block Cheddar fell
to $1.4350 per pound last
Wednesday, lowest price
since March 21, 2017, but
jumped a nickel Friday to
close at $1.4925, down
3 3/4-cents on the week,
down 22 1/4-cents since Nov.
3, and 19 3/4-cents below a
year ago when they dropped
11 cents.
The barrels dipped to
Dairy
Markets
Lee Mielke
$1.40 last Wednesday, the
lowest price since July 10,
2017, but closed Friday at
$1.41, down 25 cents on the
week, 14 1/2-cents below a
year ago when they dropped
14 1/2-cents, and they re-
versed the inverted spread to
8 1/2-cents below the blocks.
Nine cars of block traded
hands last week at the CME
and 42 of barrel.
The markets were closed
Christmas Day but Tuesday’s
trading took the blocks down
a penny, to $1.4875, while
the barrels were up a penny,
to $1.42.
Cheese producers accept-
ed spot milk at marked dis-
counts last week, according
to Dairy Market News, rang-
ing $4 to $8 under Class III.
Cheese sales remained steady
to slow. DMN said there
would be some allotted days
off during the holidays but
plants plan to ramp up cheese
production to meet the abun-
dant milk intakes.
Western cheese makers
report solid domestic retail
and food service demand has
generally helped support the
cheese market this fall. How-
ever, as holiday shipment ob-
ligations are fulfilled, there
is concern that there may be
a lull following the winter
holidays, before the football
playoffs.
Cash butter finished Fri-
day at $2.18 per pound, down
6 1/2-cents on the week and
6 3/4-cents below a year ago,
the first time in almost a year
that it fell below a year ago.
Seventeen cars found new
homes last week.
The butter lost a penny
Tuesday, slipping to $2.17,
lowest price since $2.13 on
May 10, 2017.
DMN says butter sales are
on par with previous years.
Holiday retail orders are
completed, thus food service
is now one of the priorities on
the production side. Cream
has been abundant but the
market tone remains some-
what resilient.
The western butter market
was steady to weak last week.
Contacts report that prices
are higher than expected as
holiday orders have mostly
been fulfilled and butter sup-
plies are plentiful. Some buy-
ers are expecting and waiting
for further price decreases so
they are limiting purchases to
their immediate needs.
Plentiful supply
The USDA’s last Cold
Storage report of 2017 shows
Nov. 30 butter stocks stood at
158.8 million pounds, down
59.1 million pounds or 27
percent from October and 2.4
million or 1 percent below
November 2016.
American type cheese, at
733.2 million pounds, was
down 7.2 million pounds or
1 percent from October but
20 million or 3 percent above
a year ago. The other cheese
category totaled 500.3 mil-
lion pounds, down 1 percent
from October but 13 percent
higher than a year ago. The
total cheese inventory was
down 9.3 million pounds or 1
percent from October but 76
million pounds or 6 percent
above a year ago.
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