CHICAGO, Ill. (Reuters) — Archer Daniels Midland Co. is developing plans to offset a provision in the new U.S. tax law that incentivizes farmers to sell crops to rival co-operatives, the grain merchant’s chief said, highlighting the threat the law poses to privately held elevators and processors.
The provision allows farmers a 20 percent deduction on payments for sales of crops to farmer-owned co-operatives, but not for sales to private or investor-owned grain companies such as ADM and Cargill Inc.
That has driven fears among U.S. ethanol producers and private crop handlers that they could be squeezed out of the competition to buy farmers’ crops.
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Members of the U.S. Congress have assured ADM that the provision will be “fixed legislatively” soon, chief executive officer Juan Luciano told analysts on a conference call. However, the company has already suffered a minor commercial impact from the rule and is working on potential options to offset it, he said.
“Of course, the team has been looking at options,” Luciano said, after ADM reported quarterly earnings.
“We’re not going to sit idle and see ourselves losing share.”
Luciano did not elaborate on the options or the impact of the provision on the company. A spokesperson later declined to provide details.
Republican leaders of Congress have been working with representatives of grain companies and co-operatives to address the issue since early January.
The grain sector is struggling with low crop prices following years of big harvests and is paying close attention to the tax law after support from rural communities helped propel U.S. President Donald Trump into office in 2016. The restructuring of the tax code, the biggest in 30 years, handed Trump his first major legislative victory since taking office.
