A new study says agriculture co-ops are a strong economic force in states like South Dakota – but their future is murky, because of federal tax cuts set to expire.
Farm cooperatives have been around for more than a century, allowing smaller farmers to pool together resources to buy supplies and market their products.
South Dakota State University Ness School of Management and Economics Associate Professor Matthew Elliott helped lead research into co-op profits in North and South Dakota and Minnesota.
Even though corporations and industrial farms have a growing presence in agriculture, he said co-ops have staying power.
“There is consolidation going on to achieve efficiencies, but generally we see cooperatives still maintaining a good business volume in these industries,” said Elliott, “and that’s been pretty consistent, steady, for a long time.”
He said co-ops benefit from the tax cut law enacted during the first Trump administration by allowing income from member sales to be taxed at lower rates.
The study says in 2022, that newer deduction helped generate $255 million in economic activity in South Dakota farming towns.
Republicans in Congress want to extend the broader tax cuts. But skeptics say that would require drastic spending cuts, which would harm rural communities and eat away at farmers’ profits.
When focusing solely on the co-op tax deduction, Elliot said it’s likely a more effective tool in this part of the country.
“It can be a struggle to get investment interested in our region,” said Elliott. “It’s one of those ways the dollars we do generate, we can keep here and keep multiplying and growing our economy.”
He said those are extra dollars farmers can use to boost worker pay or buy equipment from local dealers at a time when small towns struggle with population loss.
If the deduction expires, observers say these farmers will have higher tax bills.
Overall, the planned extension of the Trump tax cuts has renewed debate about whether they mostly benefit wealthier Americans, and leave middle- and low-income workers behind.
