Late in the 1998 Legislative session, the Iowa legislature passed and Governor Branstad signed into law a provision that eliminates state capital gains tax when a business is sold to a lineal descendant. Why did this happen, and what are the likely effects?

According to the National Agricultural Statistical Service, January to May 1998 Iowa farm cash receipts are down 12 percent from January to May 1997 cash receipts. In fact, early indications are that net farm income may be down by as much as 35 to 40 percent in 1998 compared to 1997. The cash receipts table (page 5) shows that both crop and livestock producers have been hit this year by lower prices. As shown by the graphs, prices received by Iowa producers for all eight commodities are below last year’s levels and well below the five-year average. In addition, this year’s above-normal summer decline in prices will result in cash receipts falling even more by the end of the year.

Low market prices for corn and soybeans have triggered two federal price support programs.

There is no doubt that we are in a grain market glut of global proportions, and it is fair to ask how we got here. It seems only a short time ago the big concern was low stocks and the possibility of market disruptions arising from yet another shortfall somewhere in the world. Since this market glut coincides with the Asian financial crisis, it has been easy to blame low prices on the collapse of Asian economic growth. However, Asia is a relatively small part of the story.