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MANAGING THE FARM
ANDREW RAPHAEL
Farmers are often advised to
add value to the livestock and
crops they produce, which can
mean looking at value-added food
processing.
It can be a profitable strategic move,
but many issues must be considered
when producing prepared food. As
we’ve seen with XL Foods, food safety
is one of the most critical.
However, all the costs related to
small-scale food processing mean
investing in food safety can be a challenge,
particularly when the money
could be used to adhere to new
changes in federal packaging regulations,
improve efficiencies, strengthen
sales margins and increase market
share.
Food safety should always be a priority.
It’s the right thing to do. However,
the reality is that consumers are
often not aware of this investment
and therefore it’s not always top of
mind for food processors that may
have many competing challenges
requiring investment of scarce
resources.
The federal government has established
programs under the Canadian
Integrated Food Safety Initiative to
help national organizations.
However, these programs do not
directly help processors buy the
equipment they need, train staff or
get certified against customer
requirements.
Provincial programs vary greatly
across the country in terms of scope
and eligibility criteria. They are also
AGFINANCE
THE WESTERN PRODUCER | WWW.PRODUCER.COM | DECEMBER 13 , 2012
FOOD SAFETY | INDUSTRY INCENTIVE
Time to introduce tax credit to upgrade food safety
Tax credit would
encourage processors
to invest in food safety
FINANCE NOTES
RIDLEY EXPANDS
Feed maker Ridley Inc. of Winnipeg
has bought Stockade Brands Inc., a
Kansas maker of mineral blocks,
loose minerals and dried molasses
for livestock. The deal was handled
through Ridley Block Operations, a
division of Ridley.
Established in 1946, Stockade operates
from a single production facility
in Pittsburg, Kansas, centrally located
within one of the most dense cowcalf
areas in the United States, Ridley
said in a news release.
The purchase price was not released.
BASF BUYS UNDERWOOD
BASF has completed its purchase of
Becker Underwood, a maker of biological
plant health products including
inoculants and seed treatments.
The deal, announced in September,
is worth $1.02 billion.
Becker Underwood has Canadian
connections.
In 2000, it bought MicroBio Group,
which owned Saskatoon inoculant
FILE PHOTO
administratively cumbersome for
small businesses and offer minimal
assistance.
Government and businesses need
to work more closely to enact practical
food safety regulatory oversight
matched by industry investment in
the infrastructure, equipment and
technology required to meet the rising
expectations of customers, regulators
and consumers.
Implementing a time-limited federal
food safety tax credit would provide
a simple, uniform, national
financial incentive for food processors
of all sizes, in all commodity
sectors and in all regions.
A food safety tax credit could
adopt the best aspects of the current
Scientific Research and Experimental
Development tax credit
(SR&ED), allowing eligible companies
to earn a credit of 35 percent on
the first $3 million of qualified
expenditures for food safety investments
and 20 percent on any excess
amount.
A food processor with a taxable
income in the immediately preceding
year that does not exceed the
business limit ($500,000 in taxable
income) would receive a portion of
the investment tax credits (ITCs)
earned as a refund, after applying
these tax credits against taxes payable.
As with SR&ED, unused tax credits
maker MicroBio RhizoGen Corp.
Becker Underwood has 10 production
sites around the world and
employs 479 people.
BASF’s crop protection division will
create a new business unit called
Functional Crop Care, which will
incorporate BASF’s activities in seed
treatment, biological crop protection,
plant health and water resource
management with those of Becker
Underwood.
Becker Underwood’s animal nutrition
business will go into BASF’s
nutrition and health division.
CWB SHIPS CANOLA OVERSEAS
WINNIPEG (Reuters) — CWB said
it has made its first overseas shipment
of canola, marking its first
diversification into crops outside of
wheat and barley.
CWB dispatched 42,000 tonnes of
canola to Japanese customers via
Prince Rupert, B.C.
It said it bought the canola from
grain companies and farmers on the
cash market, as well as through its
pooling program for farmers.
could be carried back for three years
and forward for up to 20 years.
Tax credits are an effective way to
influence the economic choices of
businesses and individuals in support
of government policy objectives.
Tax credits reduce the cost of
investment without limiting the
choice of technology or services.
It also applies regardless of which
jurisdiction has regulatory responsibility
for the plant and doesn’t have
the limiting and bureaucratic features
of grant programs.
The cost in foregone taxes is difficult
to determine because the program
will be demand driven.
However, using the costs of the
SR&ED program as a guide, 2004
government data shows that 19,600
corporations took advantage of
SR&ED tax credits at a total cost of
$3.4 billion. This suggests an average
cost of $170,000 for each participating
firm.
Based on this, the annual cost
would be $170 million if 2,000 firms
took advantage of the program and
received 50 percent of the average
SR&ED benefit.
This proposed food safety initiative
could also help reduce government’s
health care costs associated with
food-borne illnesses while assisting
the Canadian Food Inspection
Agency to streamline its operations.
Inspection will succeed only if
matched by more investment by
industry to prevent problems rather
than react to them after the fact.
Canadian food processors of all
sizes are under enormous financial
pressure, urgently trying to comply
with government regulations and
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reduce operating costs to survive in
the short-term while modernizing
and scaling up operations to grow
over the long term.
At this time, a food safety tax credit
would provide a simple, uniform
incentive to help companies keep
food safety a high priority as critical
business decisions are made.
Trust is like a mirror. Once it’s broken,
you can never look at it the same
again.
A food safety tax credit would help
reinforce the sacred trust between
the Canadian agri-food chain and
consumers, a trust that processors
need to think about every day.
Andrew Raphael is director of food and ag
manufacturing with MNP. Contact Raphael at
andrew.raphael@mnp.ca
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