By

Colin Miller

Farm Living

Irrigators can use AI-powered precision farming tools to monitor soil health, crop growth and water use in real time. These tools may come with tax deductions. Photo: File

Artificial intelligence is transforming agriculture, whether it be crop production, livestock operations or marketing.

By combining machine learning, robotics and predictive analytics, farmers are gaining financial benefits by improving crop yields and reducing costs, all while protecting the environment.

AI in crop production

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For farmers with irrigated fields and diverse crop production, AI-powered precision farming tools allow them to monitor soil health, crop growth and water use in real time.

By analyzing satellite imagery, sensor data and weather forecasts, AI systems can recommend the exact amount of water, fertilizer or pesticide needed for each field.

This has the potential to reduce waste and cut resource consumption while improving yields.

Autonomous machines equipped with sensors can detect crop diseases early and apply treatments precisely, saving time and ensuring higher-quality production.

They can also increase the optimization of water distribution by integrating weather predictions and soil moisture data, AI helps farmers conserve water while maintaining productivity, a critical advantage in areas prone to drought.

AI in livestock operations

AI is also revolutionizing livestock management.

Farmers can now use handheld devices and machine learning models to predict pregnancy in sheep, monitor cattle health and even forecast feed requirements.

These innovations reduce veterinary costs and improve animal welfare.

AI in the market

Beyond the farm, AI is being used to forecast market demand and optimize supply chains. This is done by analyzing consumer trends and global trade data.

AI helps farmers decide which crops to plant and when to sell, maximizing profitability. This is particularly important in an export-driven agricultural economy.

Are there tax benefits?

The cost of implementing AI systems into your farming operation can have tax benefits as well.

There is no single capital cost allowance (CCA) class or tax reporting method for AI, but rather it is spread over a number of areas for your consideration and to discuss with your tax professional:

Software purchased that uses AI or internally built or customized AI models would go into Class 12 depreciated at 100 per cent or Class 55 depreciated at 55 per cent, such as off-the-shelf AI software, AI plug-ins or modules added to existing software used in a farming business.

Hardware (servers, GPUs, technological infrastructure) would go into Class 50 depreciated at 50 per cent or Class 10 depreciated at 30 per cent.

Cloud computing, AI use and training fees would normally be 100 per cent deductible as a current expense.

Although it may be difficult to qualify, depending on what you are doing with AI, you may be able to take advantage of the Scientific Research and Experimental Development program.

With AI becoming increasingly used in our everyday lives, its adoption in agriculture is more than a technological upgrade; it is a strategic investment.

By lowering costs, increasing yields and enhancing sustainability, AI enables farmers to remain competitive in the market. As climate and labour challenges intensify, the financial benefits of AI will become even more critical for long-term resilience.

Colin Miller is a chartered accountant and partner with KPMG’s tax practice in Lethbridge. Contact: colinmiller@kpmg.ca. He would like to thank Yvonne Leineke and Shalyn Witdouck of KPMG for their assistance with writing this article.