Texas Daily Ag Market News Summary

Feeder cattle auctions lower; futures up.

Formula trades higher; Beef prices up.

Cotton prices up.

Grains and soybeans up.

Milk futures steady.

Crude oil up; Natural gas down.

Stock markets up.

Cattle:

Texas feeder cattle auctions were steady to lower, with instances of $4 to $10 lower. January Feeder cattle futures were up $1.15, closing at $142.92 per hundredweight (cwt). The Texas fed cattle cash trade was not active today. December Fed cattle futures were higher, gaining 22 cents to close at $119.62 per cwt. Wholesale boxed beef values were up, with Choice grade gaining 3 cents to close at $198.12 per cwt and Select grade gaining $1.38 to close at $186.87 per cwt. Estimated cattle harvest for the week totaled 471,000, down 4,000 from last week’s total and up 14,000 from last year’s total. Year-to-date harvest is up 3.06%. 

Cotton:

Cotton prices were up, closing at 75.5 cents per pound and March cotton futures gaining 2.23 cents to close at 77.94 cents per pound.

Corn and Grain Sorghum:

Corn prices were up 2 cents, closing at $3.60 per bushel. March corn futures were up, gaining 2 cents to close at $3.51 per bushel. Grain sorghum was up 4 cents to close at $5.69 per cwt.

Wheat:

Wheat was up, gaining 1 cent to close at $3.66 per bushel. March wheat futures were up a penny, closing at $4.24 per bushel.

Milk:

Milk prices were steady, with December Class III milk closing at $15.44 per cwt.

Stock Markets and Crude Oil:

Stock markets were up, with all three major indexes showing gains. February Crude oil futures were up 27 cents to close at $58.36 per barrel.

Daily Market News Summary Data

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From Agri-Pulse:

Farmers eye tax relief, some uncertainty, as tax bill crosses finish line

Many producers could see meaningful tax cuts next year, but the sweeping tax bill that Congress gave final approval to Wednesday will leave them without the certainty on expensing and estate planning that farm groups were seeking.

A last-minute hitch with Senate rules prevented Congress from finishing work on the bill Tuesday night. The House passed the bill, 227-203, Tuesday afternoon. The Senate also voted along party lines to approve the bill, 51-48, early Wednesday, but  Senate Democrats forced Republicans to first strip three minor provisions from the bill that ran afoul of budget rules. That forced a House vote Wednesday on the amended version. The final vote was 224-201 with unanimous Democratic opposition and 12 "no" GOP votes.

The bill lowers tax rate and creates a new 20-percent deduction on pass-through business income that are likely to lower farmers’ effective tax rate, which currently averages about 15 percent. 

The bill also nearly doubles the standard deduction for a couple to $24,000. 

“The bill is generally positive for corn growers,” said Sam Willett, who tracked the bill for the National Corn Growers Association. “That is probably true for a lot of agriculture.” 

The impact on an individual farmer will vary widely depending on their income, expenses, and deductions. But a simple example, provided to Agri-Pulse by Kristine Tidgren, an agricultural tax specialist at Iowa State University, illustrates the impact the bill could have: 

Farm couple Steve and Mary, who have no children, have $100,000 in Schedule F income. Under current law, they would owe $11,228 in tax on that income after taking $8,100 in personal exemptions and the standard deduction of $12,700. 

The GOP tax bill would cut their tax liability by more than 38 percent to $6,915 after the impact of the $24,000 standard deduction and the 20-percent deduction on income from sole proprietorships, partnerships and S corporations. 

Tidgren noted that the impact of the bill is much more complicated depending on the individual situation, including the number of children, charitable contributions and the amount of state taxes. 

Patricia Wolff, who has been following the bill for the American Farm Bureau Federation, said it should mean a “significant tax cut” for most farmers, but she expressed concern that the individual tax provisions, including the pass-through deduction, expire after 2025. 

Provisions doubling the estate tax exemption and expanding the Section 179 expensing allowance also would sunset.  

The expiration dates were added to prevent the bill from increasing the deficit after 10 years, which would run afoul of Senate rules for bills considered under the budget reconciliation process. Republicans said a future Congress was unlikely to let the individual tax benefits expire. 

But sunsetting the provisions also would make it more difficult for farmers to make long-term decisions, said Wolff. The Farm Bureau had long argued for repealing the estate tax on the basis that even if farms managed to stay under the exemption level the existence of the tax forced them to do costly estate planning. 

“There’s no repeal and there’s no permanent exemption level” in the bill. “Any time you have uncertainty with the exemption you still have planning costs,” she said. “The same thing applies to the lower rates and the (20-percent) business deduction.”

The National Farmers Union, which opposed the tax bill from the start, is mainly concerned about the projected $1.5 trillion increase in the budget deficit that would result from the tax cuts, said Roger Johnson, the group’s president. The deficit increase is likely to lead to GOP efforts to cut farm programs and other spending, he said. 

“What congressional leadership has come up with is a patchwork of handouts for the wealthiest corporations and individuals in our country that will be paid for by family farmers, ranchers, the lower and middle classes, and our future generations,” he said. 

But House Agriculture Chairman Mike Conaway, R-Texas, said the "historic tax relief package both simplifies our broken system and sets the economy on a course to stimulate growth and create jobs. ... From lower marginal rates to the treatment of pass-through income to improved small business expensing, this bill delivers for farmers, ranchers and all rural America.”

Other provisions of the tax bill would: 

• Repeal the Section 199 deduction that has been worth an estimated $2 billion a year to farmer cooperatives and their members. In return, both the co-ops and their members would be allowed to use the 20-percent deduction. The co-op portion of that deduction would cost the government about $415 million in lost revenue over 10 years. 
   
• Increase the Section 179 expensing allowance to $1 million, with phaseout at $2.5 million. Under current law, Section 179 allows farms to expense up to $500,000 of the cost of equipment, buildings, breeding livestock and dairy cows. The allowance doesn't apply to used equipment and is phased out when the purchases exceed $2 million.
   
• Allow farms to continue to expense interest costs and use the cash accounting method. 
   
• Limit Section 1031 like-kind exchanges to real estate. They would no longer be allowed for equipment and livestock. 

Agriculture Secretary Sonny Perdue praised the bill's passage. “I know that the hard-working, tax-paying people of American agriculture need relief," he said.

"Most family farms are run as small businesses, and they should be able to keep more of what they earn to reinvest in their operations and take care of their families. Simplifying the tax code and easing the burden on citizens will free them up to make choices for themselves, create jobs, and boost the overall American economy.”

American Farm Bureau President Zippy Duvall said the bill will result in lower taxes for the "vast majority" of the country's farmers and ranchers.

"This tax overhaul includes many changes to the tax code, most notably lower individual tax rates, that will benefit farmers and ranchers. Ninety-four percent of farmers and ranchers pay taxes as individuals, and those rates are coming down. The bill also maintains all of the important deductions and credits that farmers rely on.

So, thanks to a lot of hard work by Congress and the administration, farmers will have both lower rates and all the tools they’ve always had to manage their businesses."