Omnibus bill changes 199A
In an effort to address the 199A snafu in the Tax Cuts and Jobs Act that allowed farmers selling to cooperative to deduct up to 20 percent of total sales made to co-ops, Congress included an estimated $2.7 billion in additional tax measures in the omnibus spending bill. Changing the 199A provision back to the old system is estimated to generate $108 million over the next decade. In order to get the provision changed Congress included a tax subsidy for affordable housing at a cost of $2.8 billion. Under the new tax rules passed in December, farmers will receive a 20 percent deduction on the net of products sold. The new 199A provision reverts the cooperative deduction back to the old system. Cooperatives will again have a deduction of the lesser of 9 percent of adjusted gross income or 50 percent of W-2 wages and have the option of retaining their deduction or passing some of their deduction to their patrons. Therefore, the business deduction the farmer who sells to the cooperative receives will range between 11 percent and 29 percent of net income from sales, depending on both his operation’s W2 wages and the size of the deduction passed through to him by his cooperative. As a result of the changes, a farmer who operates a pass-through business and sells product to a cooperative will not know the full value of their deduction until it is decided what share of the cooperative’s deduction will be retained or passed back to patrons.

U.S. pushes to get NAFTA 2.0
U.S. trade negotiators are pushing to finish North American Free Trade Agreement (NAFTA) talks with Canada and Mexico as quickly as possible, a White House spokeswoman said Monday, but the official declined to comment on a Bloomberg report that Trump wants a deal in principle by the Summit of Americas meeting that begins April 13. “Negotiations are continuing on a daily basis with the goal of a successful and rapid conclusion, and the NAFTA countries will announce plans as warranted,” the White House spokeswoman said. “As Ambassador Lighthizer said in March, time is running very short to complete a new NAFTA agreement.”

China responds to trade announcement
China’s Ministry of Commerce (MOFCOM) and Ministry of Finance (MOF) separately announced a proposal April 4 to levy retaliatory tariffs of 25 percent, impacting approximately $16.5 billion in Chinese imports of agricultural and food products from the United States. The announcement is in response to the recent announcement of proposed U.S. tariffs on Chinese imports as a result of the U.S. 301 Investigation into the forced transfer of U.S. technology and intellectual property. China’s proposed tariff increases in response to the U.S. 301 Trade Action target U.S. soybeans, corn and corn products, wheat, sorghum, cotton, beef and beef products, cranberries, orange juice and tobacco and tobacco products. The announcement did not include a comment period and does not indicate a date of implementation.

Chinese tariffs could impact U.S. soybeans
Chinese imports of U.S. soybeans could drop by as much as 71 percent if Beijing moves to invoke tariffs on crops in retaliation to U.S. duties and investment curbs, according to a new study from Purdue University. The analysis, commissioned by the U.S. Soybean Export Council, modeled the effects of Chinese tariffs ranging from 10 percent to 30 percent. “The annual loss in U.S. economic well-being would range between $1.7 billion and $3.3 billion,” Wally Tyner, one of the Purdue agricultural economists in charge of the study, said in a statement. “Chinese economic well-being also falls if they impose a tariff, in some cases as much or more than for the U.S.” But as detailed in recent newsletters, we would expect lost business in China to be diverted to other countries, blunting the impact.

Gene-edited crops free of regulation
Last week, the USDA issued a statement saying it won’t  regulate certain new crops that are the products of gene editing. The statement said USDA does not now regulate — and has no plans to regulate — crops where the genetic modifications could have been achieved through conventional breeding methods. It didn’t take long for the National Grain and Feed Association (NGFA) to press USDA to work with foreign countries to make sure they will accept all U.S. exports of genetically engineered commodities. The group urged developers of gene-edited crops to “communicate proactively with consumers about the safety and benefits of the new plant breeding techniques.”

Japan’s tariff on U.S. beef reverts
Japan’s duty on U.S. frozen beef reverted to 38.5 percent as the special safeguard system reset for the new Japanese fiscal year. Japan had increased the duty to 50 percent in August 2017 after imports of frozen beef exceeded established trigger volumes. Under the terms of its free trade agreement with Japan, Australia was not subject to the safeguard duty as beef tariffs continue to fall as scheduled in the agreement.