A new tax law, which includes 20% tax breaks for farmers selling crops to agricultural cooperatives, has raised concern among private companies. Many are concerned that farmers will sell all their produce to cooperatives, causing F&B companies to lose direct supply of agricultural products, and forcing them to purchase raw materials from cooperatives at a higher price.
The tax reform aims to reduce tax bills for farmers badly hit by low commodity prices and help cooperatives remain competitive against big industry players with the expected creation of new cooperatives after years of dwindling numbers. In 2016, there were 1,953 agricultural cooperatives in the US, compared with 2,047 in 2015 and 2,289 in 2009, according to the US Department of Agriculture (USDA).
From this year, farmers will enjoy other benefits, including estate tax relief and increased deductions of up to US$12,000 for individuals and US$24,000 for joint filers, and can write off capital purchases up to US$1 million.