Lawmakers push for tax break for cattle farmers

JEFFERSON CITY, Mo. -- Supporters hope a tax break for cattle farmers and ranchers will encourage them to keep their animals longer, and spur a cattle feeding industry in Missouri.

The beef tax credit is a small part of a huge tax break bill lawmakers passed a few weeks ago that is still under review by Gov. Matt Blunt.

Tax credit backers say they're trying to encourage an industry that generally has remained farther west. The bill gives a tax break to farmers who sell their cattle later, after the animals weigh 450 pounds, about when they have been weaned from milk.

Mark Akin, general manager of Circle A Ranch near Iberia, said the tax break would be an incentive to keep cattle in Missouri. For 14 years, his ranch has shipped cattle farther west to be fattened and processed.

Akin has about 3,000 cattle that could qualify for the incentive but said the state would reap the biggest benefit by keeping more of the beef industry in Missouri.

Although Missouri is among the nation's leaders in calf production, the majority of those animals are shipped to feedlots in neighboring states, and have been for decades because corn feed was cheaper elsewhere.

"I've always questioned, in my mind, why we would really offer a bankroll to pie-in-the-sky businesses and fail to work with local businesses," said Rep. Charlie Schlottach, who owns a cattle operation.

Schlottach said the beef tax credit idea came to him while he was looking at a Missouri agriculture statistics book. He calculated that although the state has the resources for feeding operations, most animals are shipped elsewhere.

Schlottach, R-Owensville, estimated that of the state's 2 million cows, about 1.2 million are shipped out before they weigh 450 pounds.

Keeping some of those animals and helping start feeding operations, cattle producers say, could expand the billion-dollar-per-year cattle industry. At least one economic impact study found the bill would return $13.50 for every dollar spent on tax incentives.

The Missouri Cattlemen's Association didn't ask for the incentive but would like to leverage it to start smaller-scale facilities.

"This is the starting gate," said Merrel Breyer, association president. "This allows us to start looking into it, and then we can jump in."

The high price of corn in the state previously had prompted Missouri farmers to sell or transport cattle elsewhere for fattening and processing. Breyer said there's an opening now because the burgeoning ethanol industry has raised corn prices everywhere.

Average corn prices have risen nationally from roughly $2 per bushel to almost $4. Plus, ethanol production creates waste, called distillers grain, that can be used to feed cattle.

Akin said the availability of distillers grain prompted the Circle A Ranch to begin developing a feeding system. He said the tax incentive makes that even easier.

"We were doing that anyhow, so it just helps out with defraying some of the cost in operating the way that we need to," Akin said.

Schlottach said much of that tax credit would go toward developing the infrastructure for feedlots, such as equipment, lots, feeders and watering equipment.

The beef program is part of a business measure that included tax breaks for developers in St. Louis, donors to domestic violence centers, and those who make films in Missouri.

The beef portion would allow up to $30 million in tax breaks but no more than $10 million per year.

The overall bill is estimated to cost the state at least $103 million and includes several drafting errors. Both the mistakes and price have led to questions about whether Blunt will sign it.

Blunt said his staff is still reviewing the legislation and he has not yet decided whether to approve it.

"It will take longer to review than most, and after that we will make a decision," Blunt said.

Legislative budget writers estimated spending about $40 million on tax breaks, but the business incentives plus a bill cutting taxes on Social Security benefits likely would cost tens of millions more.

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Beef tax break is part of HB327.

On the Net:

Legislature: http://www.moga.mo.gov

Missouri Cattlemen's Association: http://www.mocattle.org