Better to Keep Than Give

Fri. May 27, 2016 2:28 PM


By Marcia Zarley Taylor
DTN Executive Editor

DENVER (DTN) -- Just as it pays to monitor your blood pressure or cholesterol levels, it's worth checking the health of your estate plan. Besides changes in your wealth or the status of your personal situation -- marriages, divorces, births and deaths of heirs -- new state and federal tax laws can trigger 180-degree reversals in strategies.

"Farm estate planning is radically different from what it was only five or 10 years ago," said Roger McEowen, a Washburn University law professor and tax director for CliftonLarsonAllen in West Des Moines, Iowa. Back then, federal taxable exemptions jumped all over the map and made it virtually impossible to conduct long-term planning. Recall that estates as small as $2 million were subject to tax in 2006, a worry for those with highly appreciating farmland.

Then the Tax Act of December 2010 made permanent a $5 million federal estate tax exemption, indexed annually for inflation, and adjusted the tax on estates above that level to 40%. What's more it also made the exemption "portable" between spouses, so if the first to die didn't maximize that exemption, the second spouse's estate could tap the unused amount. That suddenly meant couples didn't need to go to the expense of "equalizing" the size of their estates to get maximum exemption relief.

If you haven't reviewed your estate strategies since 2011, here are several items worth discussing with your estate planners.

Why gifting is out of vogue. So few farm estates top the current $5.45 million exemption for deaths in 2016 ($10.9 million for couples) that it isn't necessary for most farm or small business owners to reduce the size of their estate for tax purposes anymore, McEowen pointed out. Instead, what matters most is qualifying your highly appreciated assets -- particularly land -- for a "step up" in basis at the owner's death. In effect, that means a lifetime of capital gains can be forgiven if the heirs sell the property.

Watch "transfer on death" accounts. More than two dozen states have tried to simplify estate planning by giving farmland the same "transfer on death" treatment as you'd get on bank or brokerage accounts. These are legal forms you sign so your beneficiaries get title to the property without going through probate. This property gets counted in the estate and is eligible to receive a step-up in basis. Just be sure to include it in the estate.

How executors will have new duties. Starting June 30, IRS will begin requiring executors to report the tax basis of inherited property to all heirs as well as IRS. The purpose is to create a paper trail, so when that inherited property is later sold, appropriate capital gains taxes are paid, McEowen said.

The problem is that CPAs and tax lawyers worry the process will be messy, since final valuations and even a complete inventory of all assets may not be finished by the new IRS deadline. (The agency wants executors to file these mandatory reports within 30 days of filing Form 706, the estate tax report that must be filed within nine months of death, if not sooner.) In cases where assets are omitted from this report after a statute of limitations, the heir's tax basis in the property will be zero.

"It's not typical for it to take several years to settle a farm estate, but it does happen. These added duties could be a real hassle in the process," McEowen said. "It's a mess."

To ease the burden on your estate's executor, make sure you keep a current inventory of all your assets, including farm equipment, real estate, personal valuables, savings and brokerage accounts. For more details on the reporting requirement, go to

http://washburnlaw.edu/…

Marcia Taylor can be reached at marcia.taylor@dtn.com

Follow Marcia Taylor on Twitter@MarciaZTaylor

(CZ/BAS)

USDA Extends FSA Farm Changes

Fri. May 27, 2016 12:00 PM


By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Does USDA know if you are actively engaged yet?

The department announced Friday a 30-day extension for farmers to record their organizational structures with the Farm Service Agency to determine active engagement in farming.

The deadline has been extended to July 1 to complete restructuring or finalize any operational changes and determine how much interest a person has for farm programs. USDA set the extension at the request of farmers and ranchers who sought more time to comply with the rules.

"Most farming and ranching organizations have been able to comply with the actively engaged rule," Agriculture Secretary Tom Vilsack said. "This one-time extension should give producers who may still need to update their farm structure information the additional time to do so."

This issue is more critical for farmers in general partnerships and joint ventures under the department's rules for active engagement under the 2014 farm bill.

The active-engagement rule does not apply to farm entities made up solely of family members. These family farm operations were exempted from the actively engaged requirement in the farm bill.

The rule also does not change existing regulations regarding the contributions of land, capital, equipment or labor, or the existing regulations related to landowners with a risk in the crop or to spouses.

The rule for active engagement finalized last year largely focuses on farm managers and others in general partnerships and joint ventures. The rule limits the number of farm managers who can receive payments under programs such as the Agricultural Risk Coverage (ARC-County) or Price Loss Coverage (PLC).

A general partnership or joint venture must be deemed "large" or "complex" to have more than one farm manager qualify for program payments. A farm must meet the rules for both size and complexity to qualify up to three farm managers for payments.

The rules were expected to affect about 3,200 general partnerships or joint ventures that had more people listed as farm managers than considered eligible under the rule. Those operations were likely to lose out on roughly $106 million in payments from 2016-18, according to USDA analysis of the rule last year.

The default for a "large farming operation" is a farm with more than 2,500 acres, though FSA has some range in acreage built in depending on the state and kind of crop or livestock. Regarding "complexity," a farm operation that seeks payments for multiple people based on complexity must make a request to the state Farm Service Agency committee. The diversification of the operation then becomes a factor in the FSA committee signing off on that request.

If a person is found ineligible, the overall operation could lose payment eligibility for up to $125,000. Each person in the operation must contribute management or labor to qualify, or risk losing that member's share of the payment.

Farm managers must prove they contribute at least 500 hours of farm-management work per year or at least 25% of the time necessary to run the farm. And they must keep some sort of record book to show they are indeed doing the management or labor required. This new definition defines "active personal management" on the operation and only applies to farm managers on non-family farming operations seeking to qualify multiple people for program payments.

Chris Clayton can be reached at Chris.Clayton@dtn.com.

Follow him on Twitter @ChrisClaytonDTN

(CZ/SK)

DTN Distillers Grain Update

Fri. May 27, 2016 11:13 AM


By Cheryl Anderson
DTN Staff Reporter

Advancements in developing new fractionated and higher value products from distillers grains into higher value products, and new ethanol processing aids such as antimicrobials, were the focus of a number of speakers at the recent Distillers Grains Technology Council's annual Distillers Grains Symposium Thursday in St. Louis.

Dr. Harold Tilstra, manager and ingredient merchandising technical support for Purina Animal Nutrition LLC (Land O'Lakes), spoke about the trend of fraction, the first being corn oil separation.

Tilstra described oil removal as "the biggest change in distillers grains in the last decade," however, the technology has become so popular that most ethanol plants currently operating now remove oil by use of a centrifuge. The oil becomes an additional source of revenue for ethanol plants and is usually sold for biodiesel production or as an addition to some animal feeds, especially for poultry rations.

Tilstra described a variety of nutrient enhancements and concentration technologies that are being incorporated by the industry, including fiber digestion/removal. Fiber digestion involves converting fiber into sugars to achieve higher ethanol production or to provide extra energy for poultry, and possible swine rations. Fiber is removed from the corn fiber either before or after fermentation. However, fiber removal may change the nutrient profile of the resulting distillers grains, possibly even improving nutrient availability.

Protein concentration/separation is another new fractionation technology coming to the forefront -- one that can add value to the resulting distillers grains as well.

Alfredo Dicostanza, professor of beef cattle nutrition and management from the University of Minnesota, spoke about high-protein DDG in livestock rations. He said that high-protein DDG is sold at a premium to corn and that feeders like that it has better consistency because of less intensive drying that is used. The bran removal used to produce high protein DDG can also significantly reduce mycotoxins. He added that although high-protein DDG is currently being produced and sold, it needs more trials and analysis.

Challenges facing the industry regarding new fractionated products include nutrient variation, overlap in commodity space, meeting existing product definitions, customer and nutritionist acceptance, and competition for storage space at feed mills, Tilstra said.

A panel of researchers spoke about a new project: an integrated C5-based platform for coproducts from DDG: David Timmons from Brown Forman Corporation, and Jagannadh Satyavolu, Michael Nantz and Christopher Burns, all from the University of Louisville. While other fractionation methods are being used to separate the oil, starch or protein, this technology uses the corn fiber from DDG to create two coproduct streams: one that is higher in protein and another that is higher in fat and digestibility energy. The technology can also be used to use other fractions of DDG to producer sweeteners and food coloring, biodegradable polymers, cyclic olefin polymers, and aviation fuels.

Another speaker, Joe Riley from Riley Resource Group, told conference attendees about new products made from distillers corn oil (DCO). He said technology has potential uses in both feed and fuel applications, and that corn oil use was predicted to more than triple by 2022.

So far, the DCO produced has varied significantly in quality and quantity, however, Corn Oil OneTM has a processing plant in Council Bluffs, Iowa, that is producing a ready-to-use, consistent corn oil product for both biodiesel and industrial applications. This product could potentially open up new feed markets as it is antibiotic free and meets standards for pet foods (equal to human food standards). However, generally recognized as safe (GRAS) and Kosher certifications would be essential for the product, Riley said. Uses for industrial markets could include paints, polymers and lubricants, as well as higher-end applications.

Riley predicted that DCO production per bushel will continue to grow. He added that product differentiation is key to unlocking new markets, and that improved quality is the key to adding value.

PROCESSING AIDS

The symposium also featured a New Product Panel with representatives from various companies who spoke on new antimicrobial agents and processing aids developed for ethanol production.

Two speakers highlighted new antimicrobials that their respective companies have developed, a timely topic amid growing public concern over antibiotic use/antibiotic residue in livestock feed.

Eric Summer spoke about new antimicrobials for the ethanol industry developed by his company: Anitox. The company has developed an antimicrobial that takes a proactive, rather than a reactive approach to control bacteria. The product (OptimOH) is antibiotic-free and residue-free, meets generally recognized as safe (GRAS) requirements, and is injected early in the process before bacteria have a chance to take hold.

Allen Ziegler, with the Hydrite company, told attendees about Defender, a new broad spectrum antimicrobial his company has developed. Defender is an antimicrobial agent that acts on cell membranes and cell cytoplasm. It is GRAS approved for animal feed up to 173 parts per million, is effective against both gram positive and gram negative bacteria, and is available in both solid and liquid forms. Hydrite is currently running trials on the product at ethanol plants.

Cheryl Anderson can be reached at cheryl.anderson@dtn.com

Follow Cheryl Anderson on Twitter @CherylADTN

(PS/CZ)

Brazil Land Law May Retract

Thu. May 26, 2016 3:26 PM


By Alastair Stewart
DTN South America Correspondent

SAO PAULO, Brazil (DTN) -- The new government in Brazil will review a 2010 decision to bar foreigners from buying large tracts of farm land, a local press report said Wednesday.

According to O Globo, a local daily, advisers close to Interim President Michel Temer want to overturn the six-year-old ruling that limits land purchases by foreigners to small plots.

Back in 2010, the leftist government of President Dilma Rousseff took the step amid concerns that foreigners, more specifically the Chinese, were looking to buy up large swathes of grain land.

However, the Temer administration doesn't see any threat to sovereignty. The ban is "totally out of proportion" to the threat, a source close to the new president told the newspaper.

Temer took over the presidency at the start of May, while impeachment proceedings against Rousseff are heard in the Senate. Temer has wasted no time in pushing a more market-friendly agenda. Commentators think it unlikely that Rousseff will return.

For a long period up until 2010, foreigners were allowed to buy land freely. However, alarmed by Chinese purchases in Africa, the attorney general created tighter restrictions by reinterpreting a 1971 law.

According to O Globo, the government sees no legal impediment to going back to larger land sales as part of a wider effort to attract foreign investment. Officials see this as a way to help pull Brazil out of one of the deepest recessions in its history.

However, the land plan has a significant opponent in the shape of Blairo Maggi, the new agriculture minister, who wants to maintain restrictions on the purchase of agricultural land for grain use.

The presidential palace did not respond to a request for comment for this article.

The Brazilian land market is very quiet at the moment, not helped by the downturn in the economy, restricted credit and lower grain prices.

Alastair Stewart can be reached at astewartbrazil@gmail.com

(ES/CZ)

By the Numbers

Thu. May 26, 2016 2:23 PM


By Danny Klinefelter
DTN Farm Business Adviser

Counterparty risk has become an increasing concern for lenders in assessing a borrower's risk profile. Counterparty risk is defined as the risk that a party to a transaction will fail to fulfill its obligations.

Producer production and marketing contracts are an obvious example, but the concept applies to a much broader range of formal relationships. MF Global, VeraSun and Eastern Livestock have been well publicized examples, but there have also been concerns about the financial viability of several hog and poultry integrators who represent repayment risks to their contract growers. When fertilizer markets collapsed in 2008, many producers rightly worried about the security of their deposits at local retailers.

Producers can also present risks if their contracts contain quality requirements that they may fail to meet thus negating the contract or resulting in significant price discounts.

Other examples involve lenders themselves. If the size of a borrower's loan requires the involvement of participating lenders, consider their track record of commitment. Bankers in remote cities don't know you personally and may not share the relationship you have with a local lender or its alliance with production agriculture. Financial problems in a participating institution, their acquisition by another lender not committed to agriculture, or their unwillingness to work with a borrower who gets into financial trouble or whose loan requires restructuring, can also represent a major risk during an economic downturn. If the lead lender is unable to find a replacement for a participating lender who pulls out of the arrangement, it can create a house of cards where the entire borrowing relationship crumbles.

Another case which affects many products is the listed derivative markets on the major exchanges. The exchange clearinghouse is a counterparty to every sale or purchase of options or futures contracts. That eliminates the possibility that a buyer or seller won't make good on the transaction. The clearinghouse, in turn, protects itself by requiring market participants to meet margin requirements. However, there is no such protection in the unlisted derivatives market where forwards and swaps are arranged. The prime example was the collapse of credit defaults swaps during the 2008 financial crisis.

There are also the cases of counterparties to the counterparty. If the primary contracting entity is primarily dependent on a single buyer or supplier, the failure or decision by the primary buyer or supplier to go elsewhere can also lead to financial problems. Some of these firms have also been victims of foreign buyers or suppliers being hit by changes in exchange rates, the imposition of tariffs or simply economic or political problems in their own country.

In all instances it is imperative that producers and their lenders are aware of the potential risks that each of these relationships represent. Producers need to know the financial condition of their direct counterparty as well as the domestic and global economic and geopolitical issues that may affect the relationship.

Too many producers have become victims by assuming that just because the relationship has worked in the past, it will continue to work. It is always good business to develop personal relationships, open communication and have a backup plan. The effects of increases in regulations, regulatory compliance measures and changing consumers' tastes and preferences also need to be kept in mind. Just look at the impact that retailers and processors shifting to cage-free suppliers is having on egg producers.

**

EDITOR'S NOTE: Danny Klinefelter is an agricultural finance professor and economist with Texas AgriLIFE Extension and Texas A&M University. He also is the founder of the mid-career Texas A&M management course for executive farmers called TEPAP. Access his recent DTN columns at https://www.dtnpf.com/….

(MT\SK\CZ)

Dr. Dan Talks Agronomy

Thu. May 26, 2016 8:26 AM


By Daniel Davidson
DTN Contributing Agronomist

Generally speaking, if planting is delayed in May because of rains, you don't have to switch out to shorter maturities of either corn or soybean varieties. Finding seed of shorter maturity varieties for your location could be a challenge and both corn and soybeans naturally shorten their maturity requirements when planted a few weeks later than expected.

However, when we move into June all bets are off and it may be time to consider switching from corn to soybeans, depending on which has the better yield and profit potential. There are agronomic considerations that should be part of the decision to switch crops.

Planting delays are always an inconvenience involving some financial loss and require a hard decision -- do I stay with the same crop or do I switch out crops? Factors going into that decision include relative yield expectations, anticipated crop prices, meeting production contracts, application of inputs, seed availability and agronomic considerations such as running into hotter and drier weather during pollination.

Chris Hurt, Purdue agricultural economist, believes the rally in soybean prices the last three months, concurrent with the inability to plant corn, may offer the financial incentive to shift to more soybeans now. Soybean prices have been moving steadily higher since January and more money can be made off soybeans than corn. This may be an opportunity.

John Bailey, with JCB Ag Research in Effingham, Illinois, stated that in southern Illinois's light timber soils the decision to switch to soybeans needs to be made by May 20. "Planting corn in late May and into June will put corn's pollination into a hot and dry period," Bailey said. "Soybeans will fare better for us."

Of course, if you laid down a corn nitrogen and herbicide program already it probably behooves you to stay with corn. Corn roots will capture more of the soil nitrate than soybean roots will. That gives the best chance of profit from the nitrogen investment and keeps the nutrient out of surface waters. If you laid down a preplant herbicide program, it probably will hurt soybean seed germination. That's enough reason to avoid switching crops.

Shawn Conley, soybean extension specialist offered three tips when considering the switch from corn to soybeans.

Check the herbicide label. "Several burndown or early pre-plant programs have labels for both crops. However, tankmix partners or rates may differ between the two. Make sure you verify rates, timings and plant-back restrictions before you make the switch."

Consider residual nitrogen available after heavy spring rainfall. Conley said that biologically, it's impossible to know how much is too much residual nitrogen to decide whether to stay with corn or switch. "Economically that number is a moving target given yield penalty, corn drying costs, etc. Over the last four weeks (into late May) the amount of nitrogen readily available to the late-planted corn crop, or in this case soybean crop, has declined, though some nitrogen is still readily available in the soil profile."

He noted that since excess nitrogen can lead to a more lush soybean crop, growers should consider whether diseases such as white mold are an issue in the field, and select varieties, seeding rates, and timing of disease scouting accordingly.

Is an inoculant required? "Should I use an inoculant (on soybeans) even when excess nitrogen is present? The simple answer is yes," Conley said. Studies show excess available nitrogen will inhibit N fixation later on. Increasing nodulation by inoculating seed can overcome that.

Read Conley's full report here: http://thesoyreport.blogspot.com/….

Growers were best served by keeping their corn cropping plan and varieties unchanged in May even though yields may fall slightly the later in May planting occurs. However, in June moving to soybeans may make more sense if yield and revenue potential is higher and there are no herbicide limitations.

(GH/CZ/SK)

Kub's Den

Wed. May 25, 2016 2:32 PM


By Elaine Kub
DTN Contributing Analyst

Satiated by a barbecue sandwich and some German potato salad at my neighbor's recent high-school graduation party, I admired the decorations placed on folding tables throughout the 4-H event hall. There were mason jars filled with lilac blooms, framed senior photos, snapshots of trophy-winning steers and sewing projects, and a hand-painted "Advice Box" inviting all the guests to write down and drop into the box a piece of advice for the graduate as she approaches college and adulthood.

Golly, do I love being asked for advice! It's the best part of growing older; there is an ever-increasing population of people who think you've got it all figured out and who come to you for wisdom and guidance. My neighbor's graduation advice box reminded me of an email I received from a young man out of the blue a few months ago.

"I recently purchased a Kindle version of your book and am slowly learning the grain markets," he wrote, and then he followed with some very kind words about the book itself (which, of course, I'm much too modest to reprint here). Then his email continued, "What in your opinion is the best way to begin trading the grain markets, strategy wise? Do you use fundamental or technical analysis, maybe a combination of both perhaps? I have about $10,000 capital to begin trading with. Any advice you would be willing to share would be forever appreciated and in your debt.

"Best Regards,

"Justin

"Sent from my iPhone"

Well, I'm pretty sure we're all thinking of the same one-word piece of advice for this young man who wants to take his $10,000 and start trading grain futures: Don't.

Farmers and physical grain traders spend entire careers trying to minimize their risk exposure to these volatile markets, with prices as wild and as unpredictable as the weather itself. But there will always be some foolhardy souls who want the chance to participate in a 28% price rise within 11 weeks (as soybeans have done), or even the chance to make 15 cents per bushel with a day-trading guess. Putting up $2,300 in margin money for one long soybean contract on March 1 would have yielded $9,600 by now, if the speculator had guessed the correct direction of the market. I'll admit it -- in my younger years, I myself dabbled in some short-term speculation and even some day trading. I would make gains of a few hundred dollars on soybean-to-corn spread trades, or even a few thousand dollars on lucky crude oil trades; but I also remember losing $6,000 one day on a copper bet when the Federal Reserve tweaked its language and the dollar suddenly collapsed. Whoopsie daisy.

Note that I said, "When I was younger." As in, when I had even less money than I do now and was therefore even more desperate to forge any sort of profit. That's a recognized economic phenomenon. Using Kahneman's and Tversky's Prospect Theory, researchers can show that poorer people (people with less to lose) exhibit more risk-seeking behavior. Compared to people with a little more economic security, they have a different frame of reference about how good gains will feel and how bad losses will feel. A young person with not much money and no other employment prospects may feel that the risk of losing thousands of dollars in the corn market is worth it, while someone with hundreds of thousands of dollars to easily deploy in comfortable investment strategies may take a look at corn's volatility and think, "Nah." Wealth, youth, gambling, extreme sports, farming ... it's all sort of interrelated.

That's why my email pal Justin likely won't accept, "Don't do it," as reasonable advice, and he's not alone. The U.N. estimates that global unemployment rates for youth (24 years old and younger) are three times higher than adult unemployment rates. Yet they have the same dreams as anyone, and they want money to pursue those dreams. The Financial Times' coverage of the surging speculative trading volume on Chinese commodity futures exchanges has shown that many of those new speculative traders are otherwise unemployed 20-something men, "looking forward to another week of fevered risk-taking in China's hottest new casino."

Good advice to a heroin addict might be: "Always use a clean needle." In that same spirit, I put together some advice to Justin, the email writer and aspiring speculative grain futures trader.

* Technical trading signals don't always work, but it's nevertheless a good idea to look at a historical chart to see if a market will soon be bumping up against previous highs or lows that might meet psychological resistance.

* It's also a very good idea to KEEP YOUR EYE ON WHAT THE U.S. DOLLAR IS DOING FROM DAY TO DAY.

* Maybe start with some long options (i.e. buy either cheap calls or cheap puts, depending on which direction you think a market will go.) That will get you familiar with the order-placing process and the speed of the markets.

* Once you're comfortable with that, then with your $10,000, and a good fundamental hunch about a market's trend or direction, it would not be unreasonable to go long or short in a grain market using futures contracts themselves (which will earn you profit or loss faster than options), but REMEMBER TO BACK UP EACH ORDER WITH STOP ORDERS, and to remove those stop orders once you've closed each position.

* Once you really feel like you know the markets well, then in my opinion, spread trading (either calendar spread trading or intermarket spread trading) has the best reward-to-risk ratio among commodity trading strategies, but it can take months or years to research and understand a market well enough to spark those ideas.

* Do careful research on the firm with which you open a brokerage account. Human brokers can be immensely helpful for discussing trading ideas, or alternatively, they can tempt you into crazy ideas that just burn through commission fees.

* Keep good records to dispassionately assess your successes and failures, and change your strategies accordingly.

If Justin ever took my advice, he didn't write back to tell me about it. I do know that I also tried saying some of this to my 20-something cousin, who day trades Forex contracts out of his parents' basement, and he shrugged it off and continues to free-wheel along without diligent stop orders. But he is still free-wheeling along, so I guess he's not broke, and that's something of an achievement.

To my readers who are farmers, if you're like me and haven't sold much 2016 grain yet, well let's not get too sanctimonious just yet. Farmers can be grain speculators, too. We can do it directly through a futures account if we feel confident the market doesn't yet realize something about its supply-and-demand fundamentals, and that we can therefore make some money betting on a future price direction.

But we can also be unintentional speculators, exposed to all the same monetary risk, whenever we have unhedged bushels. If you've planted 100,000 bushels worth of corn but have zero forward contracts signed and zero futures or options hedges sold, then that makes you 100,000 bushels long in December 2016 corn price exposure. Who's crazier? Justin with his $10,000? Or you?

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com or on Twitter @elainekub.

Trading commodities involves substantial risk of loss. Past performance is not indicative of future results. Opinions are subject to change at any time. THIS ANALYSIS IS NOT A SOLICITATION OR RECOMMENDATION TO BUY OR SELL COMMODITY FUTURES OR COMMODITY OPTIONS.

(CZ/BAS)

Bayer-Monsanto Maybe

Wed. May 25, 2016 2:18 PM


By Pam Smith
DTN Progressive Farmer Crops Technology Editor

DECATUR, Illinois (DTN) -- Monsanto may have rejected the $62 billion deal offered by Bayer AG on Tuesday, but the St. Louis based seed and biotech company also admitted it wouldn't rule out further discussion.

Bayer has since replied that it found Monsanto's response encouraging. However, the pressure is now on the German pharmaceutical and chemical company to increase an offer that already has some Bayer investors fearing the transaction would strain the balance sheet and put too much emphasis on agriculture at the expense of health care. Monsanto said in a prepared statement that the company is "open to continued and constructive conversations to assess whether a transaction in the best interest of Monsanto shareowners can be achieved."

"We believe in the substantial benefits an integrated strategy could provide to growers and broader society, and we have long respected Bayer's business," said Hugh Grant, Monsanto Chairman and CEO. "However, the current proposal significantly undervalues our company and also does not adequately address or provide reassurance for some of the potential financing and regulatory execution risks related to the acquisition."

Bayer reiterated that its $122 per share all-cash proposal provides full and certain value for Monsanto shareholders. The bid valued Monsanto at 37% over its closing share price of $89.03 on May 9, the day before Bayer made a written proposal to the company. Monsanto's stock closed Tuesday at $111.42 a share.

"We are pleased that Monsanto's board shares our belief in the substantial benefits an integrated strategy could provide to growers and broader society," said Werner Baumann, CEO of Bayer AG, in a prepared statement following the news Monsanto had declined. "We are confident that we can address any potential financing or regulatory matters related to the transaction. Bayer remains committed to working together to complete this mutually compelling transaction."

Monsanto made several failed attempts to bring Syngenta into a relationship last year. A $2 billion breakup fee eventually become part of those negotiations and that may be one of the prenuptial assurances Monsanto is looking for in further offers.

The run at Syngenta was the first of several indications that the world's largest seed and chemical players were consolidating again. Since then, Dow Chemical and DuPont have agreed to a merger that would form a combined company valued at roughly $103 billion. Chinese state-owned China National Chemical Corp. and Syngenta agreed to a cash purchase price of $43 billion earlier this year. All of these transactions are still pending approval, and antitrust concerns are part of the discussions.

Bayer went on the offense in a media conference on Monday discussing how they see the marriage working and touting the benefits of the union with Monsanto. Under the proposed transaction, the plan was to leave the global Seeds & Traits and North American commercial headquarters in St. Louis, for example.

Liam Condon, head of Bayer's crop science division, acknowledged during the media call that the potential tie-up could possibly require some divestitures but said it was too early to speculate on what those might be. The two companies overlap mostly in cotton and vegetables on the seed side. How Bayer's LibertyLink trait technology and glufosinate herbicide business would fit with Monsanto's Roundup Ready trait system and new dicamba herbicide traits is another question.

Both Monsanto and Bayer communication officials told DTN the companies would have no further comments beyond the press releases at this time.

For more information how Bayer sees the proposal shaping up, go to: www.advancingtogether.com

Pamela Smith can be reached at Pamela.smith@dtn.com

Follow her on Twitter @PamSmithDTN

(CC/BAS)

WOTUS Expansion Moves

Wed. May 25, 2016 2:13 PM


By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- The waters of the United States rule may be halted nationally by a federal court but a district of the U.S. Army Corps of Engineers in California already is and has been enforcing aspects of the rule, according to testimony given to a U.S. Senate committee Tuesday.

A California scientist claims in written testimony to the Senate Committee on Environment and Public Works Subcommittee on Fisheries, Water and Wildlife, that Corps officials in the Sacramento district have been inconsistent in the way they make Clean Water Act determinations and have required permits for agriculture activities that are exempt.

Jody Gallaway, a California Farm Bureau member and a regulatory biologist who works with the Corps in the Sacramento district, said she expects reprisal from the Corps for coming forward about problems faced by her clients when it comes to agency interpretations of farming exemptions.

Gallaway stated that the Clean Water Act is "being abused by regulators to thwart, interrupt and challenge" existing farming operations.

"It was a difficult decision for me to provide testimony to this committee," she stated in her written testimony. "I hesitated to put my name, company, and 12 employees at risk because our work depends on maintaining a professional relationship with California-based Corps staff in the Sacramento, Redding and San Francisco offices."

Throughout the hearing Gallaway sat next to Don Parrish, senior director of regulatory relations for the American Farm Bureau Federation, but did not testify live before the committee.

The change in the Clean Water Act defining waters of the U.S. by EPA and the Corps has been tied up because of federal court battles. In recent months the U.S. Court of Appeals for the Sixth Circuit in Cincinnati ruled it has jurisdiction to hear numerous legal challenges to the rule. Agriculture and other industry interest groups are concerned the rule expands federal jurisdiction on private land.

Gallaway stated Corps officials in Sacramento began "jumping the gun" in August 2015 in implementing the rule even before it was finalized.

"I saw it when the Corps started automatically regulating additional features not historically hydrologically connected," Gallaway stated in the written testimony. Corps regulators expanded jurisdiction to features that could not be seen on the ground with the human eye. Gallaway's clients, who were in various planning stages of agricultural development and infrastructure projects became concerned, and frustrated.

When contacted by DTN for comment Tyler Stalker, deputy chief of public affairs for the Corps in Sacramento offered the following:

"The clean water rule has been stayed and we are interpreting the rules as defined prior to the clean water rule," he said.

William Buzbee, professor of law at Georgetown University Law Center, told the committee claims of regulatory overreach and expansion are "legally and factually erroneous" when it comes to the new rule.

"The clean water rule and connectivity report are directly responsive to the pleas and rulings of a majority of U.S. Supreme Court justices," he said. "Far from being illegal, they are directly responsive to Supreme Court law and well-grounded in peer-reviewed science and the long enduring Clean Water Act."

Farm groups have lamented EPA's new attempts to regulate land features using satellite imagery, as a possible violation of due process.

"No majority of the Supreme Court has ever so held, and the science contradicts this view," Buzbee said. "After all, much of the United States is often dry if not suffering from drought; when waters do flow, those channeling and connecting geographic features are of critical importance and require protection against pollutant discharges that will degrade precious and scarce water."

AG EXEMPTIONS

Parrish told the committee the Corps is paying no heed to agriculture exemptions.

When asked by Sen. James Inhofe, R-Okla., about whether the federal agencies are requiring farmers to obtain permits to do work involving otherwise-exempt agriculture activities Parrish responded, "Yes, Mr. Chairman, they are."

The concern, Parrish said, is what is happening in California will be reality for farmers across the country. The Sacramento district is regulating plowing, for example, which also is exempt.

"In the Corps' Sacramento district, any plowing no matter how shallow, in a WOTUS such as a vernal pool or ephemeral drain requires a permit," Parrish said. "The Corps issues threatening letters if farmers plow a fire break, change from alfalfa hay farming to cattle grazing and back to alfalfa hay farming or when the agency 'thinks' the farmer was plowing too deep or changing land use."

Damien Schiff, an attorney with the Pacific Legal Foundation pointed to the case of Fort Bridger, Wyoming, landowner Andy Johnson as an example of how the Corps and EPA may no longer follow the law with agriculture exemptions. Johnson had faced large penalties although he built a stock pond which is exempt from the Clean Water Act. Under a settlement, Johnson will not pay fines and won't need a permit.

Buzbee said the only activities regulated are those that lead to discharges to regulated waters, meaning "neither ordinary farming activities nor basic uses of lands, wetlands, and other covered waters are prohibited."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(CC\SK)

Need Help?

We're here to help.

Do you need help choosing an account or applying for a loan?
Contact your Starion Personal Banker today.

Have another question? Chat with us.

Our Customer Service Team is available to chat when the “Start Chat” button appears below. Click to begin a chat. If a "Chat Closed," button appears you can leave us a message and we’ll be back to you.

Start Chat

Contact Us

1.888.258.6050

- or -

Find a local branch.