PARKER, COLO. (RFD NEWS) — Drought conditions are deteriorating across parts of the Southern Plains, creating growing challenges for cattle producers in Oklahoma.
Oklahoma rancher Michael Kelsey says producers are no longer cautiously optimistic about rebuilding their herds.
“It’s really bad. I mean, it just really is,” Kelsey said. “We should be trying to rebuild the herd, and every cattleman that I know wants to rebuild the herd, but we just can’t. And so, we don’t have the forages. We don’t have the water.”
Kelsey says the lack of water is a growing concern, particularly in western Oklahoma, where more ranchers are having to haul water for their livestock. The situation is also pressuring rural water districts, with some beginning to ration water as demand increases.
“I could be doing 1,000 other things, and I’ve got to haul water,” Kelsey said.
Kelsey says some rural water districts are prioritizing people over livestock when supplies are limited, leaving cattle producers searching for other ways to keep their herds watered.
“We’re just praying to the good Lord for some good rain,” Kelsey said. “And he’s going to send it, and we’re going to figure out how to move forward from here.”
The U.S. Drought Monitor is showing worsening conditions across parts of the Southern Plains and South, including areas of Texas, Kansas and Arkansas.
IRS Drought List Gives Ranchers More Time to Defer Livestock Sales
The IRS has released its annual list of counties that experienced drought conditions, giving some livestock producers additional time to reinvest proceeds from cattle sales.
Farm CPA Paul Neiffer joined us on Thursday’s Market Day Report to explain what the drought designation means for ranchers who were forced to sell livestock because of dry conditions.
In his interview with RFD News, Neiffer said ranchers who have to sell cattle because of drought or another weather event can generally defer the tax on the sale when they plan to reinvest the proceeds in additional livestock.
“Normally when a rancher has to sell cattle because of drought or other weather event, they can collect up to a four-year deferral period to reinvest that into additional cattle,” Neiffer said.
The IRS publishes a drought list each year. If a rancher’s county, or a contiguous county, appears on the list, the producer may be able to extend the deferral period for another year.
“This is the list that comes out, and there are quite a few counties on that list that allow that farmer another year in order to reinvest in the livestock that they had to sell due to drought,” Neiffer said.
Continued Drought Can Extend Livestock Tax Deferral
If drought conditions continue, Neiffer said the tax code can allow producers to extend the deferral for another year. He said he reviewed the drought list over the past 10 years to see how many counties had remained on the list for at least 10 consecutive years.
“There are actually about 40 counties on that list,” Neiffer said.
That means some livestock producers could have sold cattle years ago because of drought and still potentially have another year to defer the tax obligation.
Neiffer also said producers who are unable to reinvest in livestock because drought conditions continue may have another option.
“If they end up not being able to reinvest because of drought, they can actually reinvest it into farm equipment or other farm assets,” he said.
What Ranchers Should Do
Neiffer said producers who have livestock sales currently being deferred should check whether their county remains on the IRS drought list.
He recommends contacting a tax adviser to verify the county’s status.
“They probably should reach out to their tax advisor and say, ‘Hey, I think my county is still on the list. Can you verify that?’” Neiffer said.
Producers can find additional information through Neiffer’s Farm CPA Report
