Canada farmers get tax break on culling herds

Wed Jul 22, 2009 12:34pm EDT
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WINNIPEG, Manitoba (Reuters) - Cattle farmers on the Canadian Prairies who have been forced to thin their herds to deal with drought -- or excessive rainfall -- will be able to defer tax on some income from the sale of breeding stock, the federal Agriculture Department said on Wednesday.

A deep cull of western Canadian herds is under way as farmers cope with high feed costs and restrictive U.S. country-of-origin food labeling laws that have reduced exports to the United States.

In central Alberta and west-central Saskatchewan, the worst drought in 50 years has forced Prairie farmers to scramble to find pasture or feed for their cattle.

Ranchers in Manitoba's Interlake region have a similar problem but with a different cause -- above-average rainfall that has prevented farmers from seeding feed crops.

Farmers in the worst-hit parts of the Prairies will be able to defer tax on breeding stock sales for one year, Agriculture Canada said. Those who have reduced their herds by 15 to 29 percent can defer 30 percent of income from net sales, while larger herd culls are eligible for deferral of 90 percent of income.

"It'll absolutely help maintain the viability of the herd," said Humphrey Banack, president of Wild Rose Agricultural Producers, an Alberta farmer group. Without the tax deferral, farmers would have paid tax on the sale of stock, then bought cattle next year with after-tax dollars to replenish their herds, he said.

Federal and provincial governments could help cattle farmers further by assisting with high transportation costs of hauling water and feed from other areas, Banack said.

(Reporting by Rod Nickel; editing by Rob Wilson)