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The steak dinners, unsolicited seed corn caps with questionable logos, are long burned or covered with grease. The claim regarding Sygenta’s interference with the US Corn market appears to be reduced to a number. The settlement committee reached a preliminary agreement and submitted it to the court for approval the second week of March.

In summary, if the court approves the settlement:

Syngenta will owe $1.51 billion to four groups, with maximum settlement cap amounts for 3 groups. The remainder after distribution to these 3 groups, a minimum of $1.44 billion, is to be distributed to group 1.

The four settlement groups were defined as:

  1. 1. Growers who did not use Duricade or Viptera
  2. 2. Growers who did use Duricade or Viptera (max $22.6M)
  3. 3. Grain handlers (max $29.9M)
  4. 4. Ethanol producers (max $19.5M)

Years of production are 2013/14 through 2017/18 and a “weighted average” percentage will be used as follows:

                2013/14 = 26%

                2014/15 = 33%

                2015/16 = 20%

                2016/17 = 11%

                2017/18 = 10%

Yield will be determined solely by FSA578s (certified production records) with the exception of landlords who will have a claim form. The calculation for settlement, though, will be acres x average county yield per acre x weighted average. If not FSA 578, it would appear that crop insurance records would be used.

The settlement does not allow for silage or “fed on farm” corn. Dairy and Beef producers who walk the corn off the farm instead of trucking it will not be making a claim for that production that was fed.

 If the settlement is approved:

The 1st notice is to be mailed 10 days from approval of this proposed agreement. The opt-out deadline is 90 days from the mailing of the 1st notice. Claims deadline is 150 days from the mailing of the 1st notice. Final payment of Syngenta escrow to fund the settlement is April 1, 2019.

Unfortunately, it is still impossible to estimate a per bushel settlement value.

This will come potentially as farmers are distracted by spring activities. These settlements rarely have a second chance if the initial deadline is missed. Even those who have “signed up” and provided information to an attorney should be on the lookout for the settlement documents, and they should follow through with the required steps to ensure they are counted in the distribution. I expect a heavy advertising campaign will ensue to make sure all producers are counted. The plan calls for using government records to generate lists of people to contact.

Don’t bid up the neighbor’s rent just yet, but the chances are increasing that a small windfall might be coming to the producers who marketed corn over the years 2012-2018.

Pay to Play, the government plans to have you pay them to do their job when you need something from them.

Infrastructure Spending

 The ag economy relies on government funded/supported roads, railways, ports and locks, and dams to get the product to the end user. A proposal to spend money on Infrastructure should be as interesting to a farm producer as the farm bill. Like all ideas, the devil is always in the details. In the latest proposal from the White House, they want to spend $200 billion on federal funded projects over the next ten years (with 25% of that number targeted to rural areas) it appears to be a pay as you go proposal.

The initial review of the plan looks to come from tolls and fees on the users of the improved infrastructure. Fear not, those costs will be passed along to the end consumer. Additionally, the plan will rely on the participation of state and local governments paying in to the projects bottom line. In some cases, they will have to fund 90% of the project and match funds to the federal dollars. Those funds are projected to come from property taxes, sales taxes, and user fees. The problem with this concept is that stressed local governments with razor thin budgets will simply forego the attempt to secure the match grant, while the areas that are economically strong will harvest those grants far easier.

Where state and local governments are not involved, the plan looks to the private sector. Specifically, the plan anticipates private industry maintaining river waterways including, locks and dams.

Farm Bill Talk

The latest proposals on the anticipated farm bill show that crop insurance copays by the producer will increase (but still having the government pay over ½ of the insurance premium) and industries that rely upon USDA services, like meat inspection, will face increased user fees for the government to do its job. Additionally, cuts in conservation program technical assistance aid are projected. The cuts and caps on copays are aimed at farm operators whose adjusted gross income is above $500,000. Using numbers from 2013, that would be about 2% of farmers effected.

Crop insurance subsidies are not necessarily a bad thing, as crop insurance in advance of a disaster is far easier to administer in the time of a disaster than the ad hoc disaster relief bills of the 1980s that used to be passed after an ag disaster like a drought. Those “after the cat is out of the bag” programs are harder to manage, implement, and enforce than standing programs.

 Tax Law Changes

The tax law updates are already being examined for loop holes and advantages, as they should be. One giant loop hole appears to be the 20% credit off the gross sales made to a cooperative of ag products.  While the initial revelation was made with assertions that the language was hasty and not the intended result and would be corrected, no correction has been made.

The effect of granting a credit based off where a commodity is sold will have an impact on the market.  While this in an over simplification, if a seller of goods realizes that 20 cents of every dollar is not taxable when they sell at the coop, and it is taxable if they sell directly to a private processor like ADM, BUNGE, or the ethanol plant, the choice seems pretty clear.

The projection is that the cooperatives will be overloaded with willing sellers, so they will lower their asking price to curb sales to match storage and capacity to sell, while the processors will move their price to adjust for the taxation discount. That is good theory in an economics exam final, but its application in the country side is suspect. I think lobbyists for the cooperative industry and the processor industry will both be hard at work to keep the status quo, or they will make the change to avoid the preferential treatment.

Generally, people prefer their back yards to never change, ever. Even if the rules allow for something different that isn’t currently being done and double if the new permitted use is loud, smelly, or interrupts view.  New proposals for property use create challenges. Nobody wants a permitted use that they don’t particularly care for to occur, especially when it impacts them, regardless of what the current zoning rules may be. That is not how zoning works, the first in line do not get to control the narrative. Instead, we establish uses based on zoning districts (ag. Commercial, residential etc) .

By doing this we all give up certain rights to do things with our property in exchange for other privileges based on the zoning and services. When we live in an agriculture district and enjoy the wide-open spaces, we should expect that livestock production will occur in those spaces. When we live in the city and get our garbage picked up, streets plowed, and water piped to our tap, we give up some of our property rights (such as loud music, building on every square inch of your lot, or keeping animals) in exchange for those conveniences. As farms have lost their nostalgic appeal from yesteryear, and are in some circles villainized, understanding how new ag practices and production techniques impact your neighbors and the current zoning law, is as important as selecting the right chemical program for your row crop production enterprise.

In Iowa, a master matrix controls rules regarding location sites for livestock buildings. Other states allow counties or cities the power to develop zoning ordinances on this issue. Iowa producers would do well to remember the special protections ag zoning and the master matrix system affords them. Consider Minnesota, where counties are in the business of granting a conditional use permit (aka a Special use permit) for new livestock feeding operations. A special use permit gives permission to do something in a zoning district that you can’t do as a matter of right, but can conduct as long as you meet terms made by the zoning authority. However, those terms can’t be outlandish or unrelated to a zoning plan.

In a recent Minnesota case, the operator applied for a permit to build a 4,700-hog finishing facility, which met all the established criteria. After a public hearing, the county granted the application. The real estate agents attacked the permit issued on some specific grounds, claiming the county didn’t apply the law correctly. The real reason, to me, was that they didn’t want hog production in the area as they feared it would drive prices down. That is classic “not in my back-yard” material. The county, or other zoning authority, is given wide discretion on what decisions it makes; the court sided with the county in this case. The take away is that the local government appointees need to be plugged into what is going on in the local environment, and what the status of the law is. The down ticket local elections for supervisors and other locally appointed boards can shape what goes on in an area for a long time.

How long Iowa will maintain its favorable ag zoning is unknown. Last legislative session, environmental groups were seeking support from county level boards to put pressure on the Iowa legislature. Their goal is to loosen some of the control the master matrix has on livestock siting in Iowa. The Minnesota rubric may well seep south in the coming years if the ag community does not stay vigilant.

             

In 2017, up to $6,350 of earned income per child are exempt from taxation. Further, the parent does not have to pay FICA tax for their children under 18 who work for them or their partnership. Corporations do not have that same exemption from paying FICA tax, regardless of who owns it. These earnings by the child can be considered income for a ROTH IRA. The ROTH IRA, as post tax dollars, can be withdrawn without penalty at any time (to include for education), only the earnings will be subject to tax.  If correctly drawn out for education, even the earnings are not subject to the early withdrawal penalties. ROTH IRA dollars are not a resource for Federal Financial Aid Considerations; however, by comparison, cash in savings accounts are considered assets. If the child doesn’t use funds for education, they continue to grow as a retirement savings. The disadvantage to a Roth IRA account is the low amount (up to the amount of earned income the child makes or in any case $5,500 maximum) that can be contributed each year.

Agricultural endeavors have an increasingly small margin for error. Operators use GPS guided equipment to precisely apply the calculated amount of seed, fertilizer, and chemical to the ground to produce a crop with the highest potential return on investment. Marketing decisions are made after considering macro and micro economic information sources, predictions on weather, and considerations for next year’s cash demand needs for the operation. Increasingly, specialists are consulted for agronomics, equipment upgrades, and marketing decisions.

Despite all the external support available, sometimes, internal record keeping can make or break an enterprise. Not keeping receipts because of assumptions regarding the other side keeping the copy, failing to document the who, what, when, where, and why of a purchase, or failing to keep accurate records of what the business is doing can come back to bite the operation years down the road.

It is so easy to put off the hard work of memorializing, filing, and storing the supporting pieces to the story of the operation. The current climate of “FAKE NEWS” and conflicting stories from once reputable news organizations will have an impact far beyond the next election cycle. It frames the finder of fact in a future dispute. Documentation and records and the ability to retrieve them become more important, not less, in this digital age. Having “the goods” when you need to produce them can be critical to establishing the legitimacy of the data, and proving that it is not fabricated.

Take a look at your record keeping in your operation. Can you provide the supporting data to the purchases, the agreements, and the transactions you undertake? Sometimes, something as simple as a receipt of payment can establish rights and responsibilities of parties for years to come. When a party to that transaction has selective amnesia, it becomes critical to be able to prove each element of the transaction.

Tuesday, May 22, 2018
  • Patrick B. Dillon
  • Jill Dillon
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Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
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Jill Dillon focuses on family law, estate planning and IRS matters. Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill spent extensive time advocating for low income tax payers in front of the IRS and the State of Iowa Department of Revenue while at Drake.

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