Cattle feeders in heart of Canada's industry say tax threatens survival

Feedlot operators in the heart of Canada's largest cattle-producing region are warning that a municipal tax introduced this past spring will result in more cattle feeders going out of business, days after one of them announced it would close.

Rick Paskal, president of Van Raay Paskal Farms in Picture Butte, Alta., and seven other operators with capacity to fatten about 250,000 cattle for slaughter have also launched a lawsuit against Lethbridge County demanding the reversal of a $3-per-head tax charged to operations of at least 150 beef cattle.

They say the tax, when added to other increasing costs and falling beef prices, will result in more feedlots shutting down over the coming months.

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"We're fighting for our survival," said Paskal.

"We're right now at a $5.50-to-$6 per head disadvantage feeding cattle here in Canada versus the United States. You add $3 on that, that's $8.50 to $9. ... The cattle will all go south."

Alberta produces 69 per cent of Canada's annual fed cattle output — about 1.8 million head — from about 150 feedlots, according to the Alberta Cattle Feeders Association. Paskal says feedlots in Lethbridge County have the capacity to deliver 500,000 of those beef cows to market.

Feedlot closure a 'wake-up call'

Western Feedlots, one of Canada's largest cattle feeders, said last week that it plans to close its three feedlot operations in Alberta by early next year due to poor financial prospects. While none of the company's feedlot operations are in Lethbridge County, Paskal said that announcement served as a wake-up call nonetheless for the cattle feeding industry.

Paskal said Western's closure would result in the loss of 100,000 head of cattle-finishing capacity, possibly leaving the industry unable to fill the needs of Alberta's two industrial scale beef-packing plants.

He said recent moves by the provincial government, such as hikes to minimum wage, pending carbon taxes and requiring agricultural businesses to enrol employees under the Workers' Compensation Act, are all expected to raise costs, compounding the problem for the cattle feeding sector.

Lorne Hickey, the reeve for Lethbridge County, defended the decision to bring in the tax on cattle and other intensive agricultural operations. He said it's needed to help cover the costs of repairing roads and bridges that are heavily used by the cattle feeding industry.

"We just have too much traffic on the roads," he said. "It's not just the animals, it's all the byproducts required to get where you're going."

Hickey said he is aware of the feedlot owners' lawsuit and won't comment on it. He said the county intends to file a statement of defence but hasn't done so yet.

He said while the county was not aware of any other jurisdiction in Canada charging a similar head tax on animals, such levies exist in the U.S.

Kevin Grier, a livestock and meat market analyst, said the southern Alberta region dubbed "Feedlot Alley" near Lethbridge is considered the fourth- or fifth-largest cattle-feeding centre in North America, ranking behind Texas, Nebraska, Kansas and sometimes Iowa, and its financial health is vital to the Canadian beef business.

A $3 per head tax will cut deeply into profit margins, Grier said. Live fed cattle prices in Western Canada are down almost 30 per cent from their peak last year, he added, predicting prices will fall further.

"It's very significant," he said of the $3 tax. "It seems small but that's the business."

Paskal and other feedlot operators are calling on the Alberta government to overturn the Lethbridge County tax. A spokeswoman for the province's Ministry of Municipal Affairs said it doesn't have the authority to do that.

But Shannon Greer said the ministry is considering the opinion of feedlot operators on taxation of intensive agriculture operations as part of a wider modernization of the Alberta Municipal Government Act.