ADM weighs options to counter U.S. tax rule, hopes for quick action

[February 07, 2018]  By Tom Polansek and Mark Weinraub

CHICAGO (Reuters) - Archer Daniels Midland Co is developing plans to offset a provision in the new U.S. tax law that incentivizes farmers to sell crops to rival cooperatives, the grain merchant's chief said on Tuesday, highlighting the threat the law poses to privately held elevators and processors.

The provision allows farmers a 20 percent deduction on payments for sales of crops to farmer-owned cooperatives, but not for sales to private or investor-owned grain companies such as ADM and Cargill Inc [CARG.UL].

That has driven fears among U.S. ethanol producers and privately run crop handlers that they could be squeezed out of the competition to buy farmers' harvests.

Members of Congress have assured ADM the provision will be "fixed legislatively" soon, Chief Executive Juan Luciano told analysts on a conference call. However, the company has already suffered a minor commercial impact from the rule and is working on potential options to offset it, he said.

"Of course, the team has been looking at options," Luciano said, after ADM reported quarterly earnings.

"We're not going to sit idle and see ourselves losing share."

Luciano did not elaborate on the options or the impact of the provision on the company. A spokeswoman later declined to provide details.

Republican leaders of Congress have been working with representatives of grain companies and cooperatives to address the issue since early January.

The world's largest corn mill of global grain company Archer Daniels Midland is pictured in Decatur, Illinois March 16, 2015. REUTERS/Karl Plume

Some grain handlers were hoping Congress would include a solution in a spending bill that the U.S. House of Representatives was set to vote on Tuesday evening.

Republican senators Pat Roberts of Kansas, John Hoeven of North Dakota and John Thune of South Dakota were still working on a resolution on Tuesday afternoon, a spokeswoman for Roberts said.

"Whether it's coming now or coming in the next month, it's coming in the near future," Luciano said on the call.

The grain sector is struggling with low crop prices following years of big harvests and is paying close attention to the tax law after support from rural communities helped propel U.S. President Donald Trump into office in 2016. The restructuring of the tax code, the biggest in 30 years, handed Trump his first major legislative victory since taking office.

(Reporting by Tom Polansek and Mark WeinraubEditing by Matthew Lewis)

[© 2018 Thomson Reuters. All rights reserved.]

Copyright 2018 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.