Loading grain may become a more sporadic proposition if a federal government decision to eliminate cash deferral of sales goes through

Grain farmers face hardship with federal decision

A decision in the latest federal budget will hurt grain and oilseed farmers by taking a tool out of their financial arsenal.

A decision in the latest federal budget will hurt grain and oilseed farmers by taking a tool out of their financial arsenal.

In its budget released on March 22, the government stated it planned to eliminate the deferral option on cash purchase tickets for grain sales.

Essentially, this means any grain sold must be counted as income in the year the transaction is made. Currently, farmers are allowed to purchase cash tickets from companies that would defer the income from that sale into the following year.

As outlined in the budget document mentioning the plan, the federal government feels there is no longer a need for payment of sales to be deferred by farmers since international grain shipments are now the responsibility of private grain handling companies.

Previously, the sole source of handling international grain sales was the federally-operated Canadian Wheat Board (CWB) and those international agreements laid out specific delivery amounts and payment upon delivery. That left the CWB paying farmers for sales that had not taken place, so the deferral payment program was put in place.

However, the government is holding a consultation period on the issue and producer groups are hoping to use the time to change the government’s mind.

According to Kevin Auch, chair of the Alberta Wheat Commission (AWC), this move will take away an important business management tool farmers have used for decades that helps balance out their income over the year.

“If farmers can’t use this tool and defer that income, people are going to tend to store more grain beyond their fiscal year-end rather than sell it and be able to put that into the next year,” stated Auch in a phone interview.

“If farmers are not going to make a move on a sale, the government may in fact get less tax than they believe with this move and the only one to make more off it will be the ones who are selling more bins.

“What that will do is lower everyone’s income and lower the amount of taxes paid because farmers would rather stay at their average income than take a hit by paying extra taxes.”

Auch added that this tool could be abused, but if farmers are simply delaying the payment of taxes then the federal government will get its share eventually.

“Having the deferral can be a benefit, to both farmers and the government, if farmers are ready to go ahead with a sale rather than just delay and storing all that inventory,” he said.

“I’m not a real big fan of farmers losing a tool that has a purpose. Farming is a different kind of business than any other.”

The federal government has issued a May 24 deadline for any stakeholders to hand in submissions on the issue and Auch explained the AWC is currently developing a response and is encouraging any farmers to reach to them to provide input they would like to have.

“A lot of farmers, without this tool, could miss out on the best sales if they can’t defer the income,” he added.

“This isn’t a tax dodge, as farmers still pay all the tax on the deferred sale. It simply helps average out their income, with the potential benefit of turning a bad year into an average one.”

 

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