What’s Ahead for U.S. Farmers and Cooperatives.
Expert views from Michael Dolch, Director of Government Affairs, Ag Processing Inc.
As the harvest season approaches, several legislative issues are set to impact the U.S. agriculture sector. From the upcoming farm bill to the reauthorization of Section 199A and updates to trade agreements and biofuel tax credits, these policies will shape the future of farming operations, agribusinesses and cooperatives. Here’s a closer look at the latest developments and their implications for the industry.
Renewing the Farm Bill: Challenges and Priorities
The one-year extension of the 2018 Farm Bill, which guides U.S. food and agriculture programs, expires on September 30, 2024. Stakeholders are waiting for either another extension or a new bill to drive rural economies, ensure food security and sustain farm safety net programs. Ongoing political disagreements, budget constraints and differing priorities could delay its passage beyond 2024. Key areas of focus for the new farm bill include:
- Crop Insurance: Strong bipartisan support is expected for crop insurance, which helps farmers manage risks related to weather and market volatility.
- Conservation Programs: Expanded funding and increased access to programs like the Conservation Stewardship Program and Environmental Quality Incentives Program are expected. Lawmakers are also pushing for more flexibility to help farmers adopt sustainable practices.
- Rural Development: Investments in rural broadband, infrastructure and local economies are top priorities.
For cooperatives, a new farm bill is critical to ensuring farmers’ productivity and access to programs like crop insurance and conservation resources. These programs provide financial stability in the face of market and weather volatility, enabling farmers to invest in their operations. A well-structured farm bill also supports cooperatives by maintaining a steady supply chain for delivering high-quality products and services to their members.
Section 199A Reauthorization: Vital Support for Co-ops
Section 199A, a crucial tax provision for farmer cooperatives, allows them to pass a portion of their tax savings to members. This deduction has helped cooperatives remain competitive, invest in capital improvements and support their members. However, this provision is set to expire next year, raising concerns about its future under a new Congress.
Many advocates, including AGP, are pushing for the permanent extension of Section 199A, recognizing its role in maintaining the financial health of cooperatives. Without renewal, cooperatives would face higher taxes, reducing dividends and benefits passed on to farmers. AGP is actively lobbying for the extension to ensure continued investment in member services, market access and infrastructure.
Trade: Ensuring Market Access for U.S. Agriculture
Trade plays a critical role in U.S. agriculture, with a large portion of farm income reliant on export markets. In 2023, agricultural exports totaled nearly $175 billion, with key commodities like soybeans, corn and livestock products leading the way. Maintaining strong trade relationships with key partners, including Canada, Mexico and Southeast Asian countries, is essential for long-term stability.
The expansion of soybean processing capacity across the U.S. is leading to a surplus of soybean meal, driving the need for new markets. To accommodate this growth, AGP is doubling its export capacity at the Port of Grays Harbor, aiming to ensure a reliable home for soybean meal in international markets.
However, challenges remain, including rising protectionism and trade disputes. The U.S.-China trade relationship is a focal point, particularly for soybean exports. Meanwhile, disputes related to biotech crops under the U.S.-Mexico-Canada Agreement are putting pressure on the sector. Advocates are calling for a renewed focus on strengthening trade agreements, expanding market access and addressing barriers that hinder agricultural exports.
Biofuel Tax Policy: Driving Demand for Homegrown Fuels
The biofuel industry continues to drive demand for U.S. corn and soybean oil, with tax credits playing a key role. The Inflation Reduction Act of 2022 extended biofuel tax incentives, such as the biodiesel and renewable diesel income tax credit (BTC). For over a decade, this credit has promoted the production of cleaner, domestically produced fuels, benefiting U.S. farmers and producers.
Starting in 2025, the familiar BTC will transition into the 45Z Clean Fuel Production Credit, a new, technology-neutral credit designed to reward the production of fuels that lower carbon and greenhouse gas emissions. However, the future of these tax credits is uncertain due to the lack of regulatory guidance from the U.S. Treasury. Biofuel proponents are urging the administration for immediate clarification to restore market certainty and continue the industry’s growth.
At the same time, imported feedstocks with lower CI (carbon intensity) scores—such as used cooking oil, tallow and other similar inputs—are exerting pressure on soybean crush margins and farm gate bids for soybeans. These feedstocks have the potential to displace soybean oil (and corn oil) on a 1:1 basis, gallon for gallon. This competition threatens to reduce demand for domestic oilseeds, further complicating market dynamics.
The outcome of these tax policies is crucial. Without continued support for biofuels, demand for domestic crops like soybeans could weaken, affecting the entire agricultural supply chain.
Conclusion: A Critical Moment for U.S. Agriculture
The agriculture industry is at a critical juncture, with Congress debating key issues like the farm bill, Section 199A, trade agreements and biofuel tax credits. For cooperatives, these policy outcomes will have far-reaching impacts on their operations and the livelihoods of their members. AGP remains committed to advocating for policies that promote sustainable growth, rural development and a competitive marketplace for U.S. farmers.
ABOUT MICHAEL DOLCH
Michael is the Director of Government Affairs for Ag Processing Inc (AGP). In this role, he is responsible for developing and executing government relations strategies supporting AGP’s cooperative members and their farmer owners.
Michael began his career in farm policy with Syngenta in Washington, D.C., during the 2014 Farm Bill. He then served as a legislative assistant for Senator Joni Ernst (IA), advising on agriculture, trade and biofuels issues. Most recently, Michael led policy development and grassroots advocacy at the Iowa Soybean Association as the Senior Director of Public Affairs. His efforts were instrumental in mobilizing soybean farmers and advancing policies that benefited Iowa agriculture and the soybean industry.
He studied Agricultural Communications at Iowa State University and remains actively involved on his family’s farm near Villisca, Iowa.
