Private grain buyers working with senators to change tax-overhaul provision that favors grain cooperatives

"Republican U.S. senators are working with some of the world's biggest agricultural merchants to undo a last-minute provision in the tax overhaul that threatens to distort the grains market and starve private firms of corn, soy and wheat supplies," Tom Polansek reports for Reuters. "The provision gives farmers a 20 percent deduction on payments for sales of crops to farmer-owned cooperatives, but not for sales to private or investor-owned grains handlers." The language was intended to help co-ops and their farmer-owners because the tax overhaul eliminated a part of the tax code that had benefited them for more than a decade.

"If legislators do not address the provision by the autumn harvest, private grain companies could lose out on deals to buy billions of bushels of corn and soybeans," Polansek reports. "Farmers already are looking at how they can transfer grain stored at private elevators to co-ops to take advantage of the new law."

Co-ops defended the new tax law. "Chris Pearson, chief executive of the South Dakota Wheat Growers co-op, said on Twitter on Wednesday that the law 'gives farmers some nice tax advantages when doing business with the ORGANIZATION THEY OWN!'" Polansek reports.

Large private grain traders like Cargill Inc. and Archer Daniels Midland Co., which would lose out with the provision, have urged senators to change it, and it looks like they're listening. The National Council of Farmer Cooperatives and the National Grain and Feed Association have been working with Republican Sens. John Hoeven of North Dakota, John Thune of South Dakota and Pat Roberts of Kansas to find a more palatable solution. The Department of Agriculture said last week that it expects a solution soon.