Feds must rethink review of deferred cash purchases

Federal Finance Minister Bill Morneau must listen closely to farmers during the coming public consultation process that will seek input into a proposal to eliminate the option of deferred cash purchase tickets for six crops.

To farmers, this is a genuine cash-flow management tool that allows them to earn the best price for their crops while mitigating the impacts of up and down harvest seasons.

It’s important to note that farmers are already taking hits elsewhere. In Saskatchewan, farmers lost the 15-cent-per-litre tax exemption on bulk gasoline purchases and the exemption on diesel for in-field use drops to 80 percent.

In Alberta, the provincial carbon tax will have a growing impact, as it will when it’s introduced, one way or another, in Saskatchewan and Manitoba next year.

Currently, farmers can sell six crops — wheat, oats, barley, rye, flax and canola — with the option to delay payment, and thus taxes on that revenue, until the following year. This lets farmers take advantage of good prices for crops while avoiding the higher taxes in the selling year.

If the following year is another year of high crop prices or good yields, so be it. It will be great for farmers and the federal government, which enjoys higher tax revenue.

However, if prices are lower the following year, the deferral cash ticket option mitigates the effects of lower revenues.

The original impetus for the policy was compensation for the Canadian Wheat Board’s status as the main purchaser of wheat and buyer of other crops on the Prairies. That rationale ended with the privatization of the CWB and the move to open markets, but the deferred cash purchase’s emergence as a cash-flow tool in increasingly competitive markets remains legitimate.

Farming is not a single-year enterprise. Ottawa acknowledges this in the AgriStability program, in which farmers can claim compensation based on a three-year average from the previous five years, in which the highest and lowest revenue years are dropped.

Taking an important financial management instrument away from farmers flies in the face of that acknowledgment.

If farmers lose the cash ticket deferral they may have to manage sales differently, introducing even more uncertainty into their business. For instance, more grain would likely be stored, requiring more investment in storage and grain handling — another expense.

A report by accounting firm MNP rightly asks whether this change could affect the sustainability of some farms in times of low margins. The report also notes the deferred cash purchase tickets option is an economic driver, asking what would happen to machinery dealerships and crop input suppliers if farmers altered their spending patterns upon the elimination of the deferred cash purchase option.

The federal government has recently identified agriculture as an important growth sector. Ottawa wants Canadian food exports to grow by $15 billion to $75 billion annually by 2025.

Handcuffing farmers’ decision-making options is not how you convince them to invest and grow — it is a move that will encourage them to entrench.

On top of this, the comment period, which ends May 24, comes as farmers are engaged in the busy seeding season.

To start with, the consultation period needs to be extended to allow farmers to make what is a compelling case to maintain the current policy.

Bruce Dyck, Barb Glen, Brian MacLeod, D’Arce McMillan and Michael Raine collaborate in the writing of Western Producer editorials.

About the author

explore

Stories from our other publications