USDA Timing on PARP Payments Has Tax Implications

Farm Journal
Farm Journal
(Farm Journal)

Farm, biofuels coalition responds to Fifth Circuit RFS exemptions decision


 

Today’s Digital Newspaper

 


Abbreviated report today as I am en route to Great Falls, Montana, to speak at the Montana Grain Growers Assn. meeting.


— Equities yesterday: All three major indices opened the week with losses after Friday's shortened trading session. The Dow was down 56.68 points, 0.16%, at 35,333.47. The Nasdaq lost 9.83 points, 0.07%, at 14,241.02. The S&P 500 declined 8.91 points, 0.20%, at 4,550.43.

— Agriculture markets yesterday:

  • Corn: December corn fell 7 3/4 cents to $4.55 1/2 and closed near the session low, while March corn dropped 7 1/4 cents to $4.75 1/4.
  • Soy complex: January soybean futures fell 1 cent to $13.29 3/4. December meal futures rose $1.3 to $458.7, though closed nearer session lows. December bean oil futures rallied 38 points to 51.91 cents.  
  • Wheat: March SRW wheat fell 16 1/4 cents to $5.61. March HRW wheat closed down 15 cents at $5.96 1/2. Both markets closed near their session lows and hit contract lows. Spring wheat futures dropped 14 3/4 cents to $6.99 3/4.
  • Cotton: March cotton plummeted 173 points to 79.26 cents, the lowest close since Nov. 9.
  • Cattle: February live cattle closed down $2.15 at $168.825, nearer the session low and hit an eight-month low. January feeder cattle dropped $6.525 to $212.80. Prices hit a 10-month low and closed near the session low.
  • Hogs: December lean hogs rallied 30 cents to $67.875, though deferred contracts faced steep losses, as February futures dropped $1.85 to $66.925.
     

— PARP and tax deadline. We are getting questions from farmers and accountants wondering if Pandemic Assistance Revenue Program (PARP) payments are still going to be made in 2023. Many are tidying up taxes for 2023, so they’re getting antsy.

     A USDA official told us: “You are correct, the end of year always becomes sensitive with FSA issuing program payments due to the potential tax burden and providing producers the opportunity to prepare, not to mention the burden on staff that are trying to use leave during the holidays. We are currently waiting for the Secretary’s office to give us the green light to process. I would say that if we don’t get the green light this week to process those payments by next week, there is a chance that these payments will wait until after the first of the year.”

— Saudi Arabia is urging other members of the OPEC+ coalition to reduce their oil-output quotas to stabilize global oil markets, Bloomberg reports. The OPEC+ leader has been making a largely unilateral supply cutback of 1 million barrels a day since July. However, some members are resisting this call for further reductions. The OPEC+ policy meeting was delayed by four days due to a dispute over African quotas. Despite these developments, oil prices have declined for a third consecutive day as signals of oversupply outweigh hopes of trimmed output.

— In 52 days, funding runs out for Agriculture, FDA, Energy and Water, Military Construction-Veterans Affairs and Transportation and Housing and Urban Development spending bills. The rest of the government runs out of money on Feb. 2.

— What House Speaker Mike Johnson (R-La.) said about aid to Ukraine: “Ukraine is another priority. Of course, we can’t allow Vladimir Putin to march through Europe and we understand the necessity of assisting there. What we’ve said is that if there is to be additional assistance to Ukraine, which most members of Congress believe is important, we have to also work and change our own border policy. And so, there’s been a lot of thoughtful negotiation ongoing with that.

     “I think most of our Senate colleagues [recognize] those two things need to move together because we owe that to the American people. That’s what they’re demanding that we do. With regard to the rest of it, there are some other items in a supplemental package. I think all that will come together in the coming days. We have a sense of urgency about this and there are deadlines on it as well. So, I’m confident and optimistic that we’ll be able to get that done, get it over the line.”

— The temporary truce in fighting between Israel and Gaza-based militant group Hamas is being extended from four days to at least six, a Qatar official announced Monday morning — potentially allowing for the release of more hostages and for more aid to get into Gaza.

— BOE chief says don't expect rate cuts any time soon. The Bank of England (BOE) probably won’t cut rates in the “foreseeable future,” Governor Andrew Bailey told the Newcastle Chronicle newspaper. While recent progress on inflation is good news, he warned the rest of the battle will be “hard work.”

— Beijing on Friday made a conciliatory gesture toward the EU by offering unreciprocated visa-free travel for citizens from Germany, France, Italy, Spain, and the Netherlands, beginning in December 2023. Travelers from these countries will be able to visit China for up to 15 days annually without needing a visa. Key points and context according to Trivium China:

  • Significance of the countries: These five nations are considered the core of the EU and drive much of its political and economic activities, accounting for 62% of the EU's population and 68% of its GDP. They also play a central role in EU-China exchanges, have substantial Chinese diasporas, and contribute significantly to EU foreign direct investment in China.
  • Previous visa policies: Before this announcement, China had only offered unreciprocated 15-day visa-free travel to citizens of Singapore and Brunei. Other countries had limited visa-free transit options with shorter durations.
  • Diplomatic context: Beijing's move is seen as an attempt to facilitate business travel and revive people-to-people exchanges while seeking to ease tensions with the EU amidst its growing assertiveness on various issues.
  • Limited impact: Despite this gesture, the EU is likely to maintain its perception of China as a systemic rival, as this policy alone is unlikely to address the broader challenges and issues between the two entities.

     Bottom line: This move reflects China's desire to improve diplomatic relations and foster economic ties with key EU member states.

— ECB President Lagarde hints at early end to bond purchases. Christine Lagarde, President of the European Central Bank (ECB), indicated that the ECB is likely to discuss speeding up the reduction of its balance sheet by ending its remaining bond purchases earlier than initially planned. Her remarks in the European Parliament suggest that the ECB is considering further tightening monetary policy beyond its previous interest rate hikes by reducing bond purchases in the coming year. Some ECB members with a more hawkish stance have been advocating for the end of bond reinvestments, arguing that this additional monetary stimulus is inconsistent with efforts to combat inflation through rate hikes. They also contend that the pandemic crisis, which initially justified the bond purchases, has effectively ended. Lagarde mentioned that the matter of bond reinvestments will likely be discussed and considered by the ECB's governing council soon. A decision on this issue will have implications for the ECB's monetary policy direction.

     Analysts anticipate that the ECB will likely implement a gradual reduction in pandemic emergency purchase portfolio (PEPP) reinvestments rather than abruptly ending them to avoid unsettling investors. Some forecasts suggest that the ECB could halve PEPP reinvestments for six months starting in April before completely ending them in October. This approach would lead to a gradual reduction in the ECB's bond portfolio.

— Farm, biofuels coalition responds to Fifth Circuit RFS exemptions decision. A coalition representing farmers and ethanol producers has responded to the Fifth Circuit Court of Appeals' decision to remand the rejection of six small refinery exemption requests to the U.S. Environmental Protection Agency (EPA). The coalition, which includes the Renewable Fuels Association, Growth Energy, American Coalition for Ethanol, and National Farmers Union, expressed disappointment but stated their commitment to defending the Renewable Fuel Standard (RFS) and addressing the misuse of small refinery exemptions.

— Gasoline prices in the U.S. have been on a 60-day consecutive decline, marking the longest downward streak in over a year. The average price per gallon is now $3.25, which is more than 60 cents lower than the peak in mid-September and about 30 cents cheaper than the same period last year. This drop in prices is beneficial for consumers as they have more money to spend during the holiday shopping season, potentially boosting retail sales. They may be welcomed by President Joe Biden as he seeks to highlight the economy's resilience, low unemployment, and decreasing inflation ahead of his re-election campaign.

— Efforts to refill the U.S. emergency Strategic Oil Reserve (SPR) are facing delays as some companies, including Shell, TotalEnergies, and Chevron, have postponed returning borrowed barrels. These firms participated in an exchange program over the past two years, and while they were initially scheduled to repay the borrowed crude this year and next, they received approval to delay the returns until 2024 and 2025, per gov’t documents. Only Phillips 66 has completed its repayment so far, but due to accounting maneuvers, it didn't add any barrels to the reserve. The U.S. emergency stockpile has been significantly depleted, and replenishing it is proving to be a slow process.

— USDA invests $196 million to strengthen food supply chains. In an announcement made during the inaugural meeting of the White House Council on Supply Chain Resilience (link to White House Fact Sheet), President Biden and USDA Secretary Tom Vilsack revealed that USDA is investing nearly $196 million in 185 projects across 37 states and Puerto Rico. These investments aim to strengthen American food and agriculture supply chains, expand markets for agricultural producers, and reduce food costs. Some highlights of these investments include:

  • Lone Star Bakery in Texas will receive a $40 million Food Supply Chain Guaranteed Loan to modernize facilities and meet the needs of its customers.
  • Merchant's Garden LLC in Arizona will utilize a $250,000 Value-Added Producer Grant to expand marketing and sales of prepackaged salad mixes, becoming a local supplier of organic leafy greens.
  • Lot 279, LLC in Nebraska will use a Value-Added Producer Grant to process, market, distribute, and advertise their direct-to-consumer beef cattle cuts and shares, increasing revenue and expanding their customer base.
  • The Center for EcoTechnology Inc. in Massachusetts will receive a $24,355 Rural Business Development Grant to support small farmers in decarbonizing their farmwork through outreach, technical assistance, training, and education.

     USDA is utilizing various programs to create economic opportunities in rural areas, including Rural Business Development Grants, Value Added Producer Grants, Business and Industry Loan Guarantees, the Food Supply Chain Guaranteed Loan Program, and the Rural Economic Development Loan and Grant Program. These initiatives aim to boost rural businesses, promote economic development, and contribute to the resilience and diversity of the U.S. food supply chain.


 

KEY LINKS


WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | Student loan forgiveness | Russia/Ukraine war, lessons learned | Russia/Ukraine war timeline | Election predictions: Split-ticket | Congress to-do list | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | New farm bill primer | China outlook Omnibus spending package | Gov’t payments to farmers by program | Farmer working capital | USDA ag outlook forum | Debt-limit/budget package |


 

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