Evening Report | April 2, 2024

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Cal-Maine Foods halts egg production at Texas facility after detecting HPAI... Egg producer Cal-Maine Foods said it temporarily halted production at its Farwell, Texas, facility after detecting highly pathogenic avian influenza (HPAI). The company said it culled about 3.6% of its total flock, including 1.6 million laying hens and 337,000 pullets, after the facility tested positive for the virus. Cal-Maine said no eggs have been recalled as there is no risk related to bird flu associated with eggs. It is working with government officials and industry groups to mitigate the risk of future outbreaks.

USDA’s trade mission to South Korea leads to new deals, focus now on India... USDA’s trade mission to South Korea yielded $67 million in business agreements, signaling strong interest from Korean businesses in U.S. food and ag products. USDA Undersecretary of Agriculture for Trade and Foreign Agricultural Affairs, Alexius Taylor, highlighted discussions on chemical and biotech trade issues with South Korean officials. South Korea, America’s fifth-largest export market, imported over $8 billion in U.S. food and ag products in 2023, making it a key focus for export market growth. Taylor emphasized the success of U.S. companies in securing deals during the mission and highlighted the importance of the South Korean market for market diversification efforts.

USDA officials “met and had discussions with several of their key regulators in the biotechnology space,” Taylor said, adding she met separately with in-country representatives for U.S. agrichemical firms to “hear firsthand some of the on the ground challenges that industry is having and be able to raise those with counterparts.”

During the session, Taylor was asked what trade concerns she heard related to the ongoing bird flu outbreak — including recent infections in dairy cattle and the first human case. She said the U.S.’ reputation for food safety remains strong and importers have confidence in the U.S.’ animal disease detection and response infrastructure. “I think that also gives a lot of confidence around the safety of our products and our exports, as well as our ability to follow science when we do open our markets—and having competence in the scientific evaluation that they're the same as the surveillance and monitoring systems and processes that we have on the ground here in the United States,” Taylor said.

USDA’s next trade mission is set for India, leveraging recent tariff reductions on U.S. specialty crops to bolster market opportunities.

AEI addressed farm bill, SAF... The prospects for Congress approving a new farm bill in 2024 have apparently become so dim they are almost invisible, says the American Enterprise Institute (AEI). When passing a new farm bill in 2023 became infeasible, Congress extended the provisions of the 2018 Farm Bill through the end of the 2024 fiscal year. Many lawmakers and commenters are now suggesting that a new bill may well not be approved until members of the 119th Congress have begun their work in 2025.

Nevertheless, AEI say farm interest groups have continued to push for increased subsidies to farm income safety-net programs by raising support prices that would trigger more frequent and larger payments, ideally as soon as possible. They have received strong support for this policy change from Republican members of the House and Senate agriculture committees, who have been unable to identify viable funding sources for the increases in the context of a new farm bill.

The group notes that USDA Secretary Tom Vilsack has suggested he could use his discretionary authority over surplus Commodity Credit Corporation (CCC) funds to increase those subsidies. Vilsack has stated he would talk to lawmakers about this. Vincent H. Smith, Joshua Sewell, and Eric J. Belasco open the first issue of AEI’s Seasonal Harvest by asking whether Vilsack’s suggestion is an appropriate use of administrative discretion and whether Congress should rein back the secretary’s authority to disburse unspent CCC moneys to programs often targeted to gain farm votes in federal election years.

As for biofuel policy, AEI’s Andrew Swanson and Aaron Smith examine the potential impacts on land use for crop production if the Biden administration used biofuels to reach its goal of producing three billion gallons of sustainable aviation fuel (SAF) by 2030. They estimate that meeting the goal by increasing ethanol production would require feedstock from about 10 million acres of corn. However, meeting the SAF goal by increasing soy-based biodiesel production would require feedstock from about 40 million acres of soybeans. Given the likely impacts on land use and crop prices, Swanson and Smith ask whether SAF produced using either crop will reduce greenhouse gas emissions from aviation fuel.

Fate of tax cut bill in Senate hanging by threads... The bipartisan tax bill faces yet another obstacle as it competes for attention on the Senate’s crowded agenda. With key Republicans showing little interest in advancing the bill, it must vie for floor time against a plethora of pressing issues, including confirming judges, infrastructure projects, rail safety, cannabis banking, a new farm bill and more. Despite the bill’s importance, its political viability is diminishing, with questions arising about senators’ continued interest after the looming tax filing deadline. Senate Majority Leader Chuck Schumer (D-N.Y.) faces tough decisions on whether to prioritize the tax bill over other legislative priorities and whether to risk a failed procedural vote. Some argue for forcing a vote to highlight Republican opposition, while others caution against an early defeat.

The 2017 tax reform law ushered in significant changes to the tax landscape, but many of its provisions are set to expire after 2025, reverting to the rules in effect for 2017 unless extended by Congress. Here are some key provisions likely to change in 2026:

• Tax brackets: Individual income tax rates are expected to return to their pre-2018 levels, with different income breakpoints.
• Standard deductions: The doubled standard deductions from 2017 will likely revert.
• Child credits: The increased child tax credit and additional credit for dependents may expire. Prior to 2018, it was $1,000. Now, it’s $2,000.
• Alternative minimum tax (AMT): Higher exemption amounts resulting in fewer taxpayers paying AMT could revert.
• Qualified business income deduction: The 20% deduction for pass-through entities might change.
• Adjusted-gross-income limitation on cash donations: The increased limit for charitable donations may end.
• Estate and gift tax exemption: The larger exemption amount for estate and gift taxes may decrease. People who die in 2024 have a $13.610 million exemption per individual versus $5.490 million for 2017 deaths (adjusted for inflation, 2026 individual exemption would be $7 million).
• Deductions: Various deductions such as personal exemptions, state and local taxes, home mortgage interest, and miscellaneous deductions subject to AGI thresholds may be affected.
• Tax breaks not in the 2017 law: The expansion of the Obamacare health premium credit and tax exemption for forgiven student loan debt may expire.

Bottom line: Overall, significant changes are anticipated in 2026 as many tax provisions from the 2017 law are set to revert unless Congress takes action to extend them.

Watch for yen intervention remains elevated... Japanese Finance Minister Shunichi Suzuki again warned market participants about trading activity that has prompted a major decline in the yen against the U.S. dollar. However, no action has been taken yet.

“All we can say is that we will take appropriate action against excessive volatility, without ruling out any options,” Suzuki said. He noted officials were monitoring the situation daily with a “strong sense of urgency.”