Canadian beef packers looking for government aid

* Want costs covered for disposing of risky parts

* Seeking annual payment of C$26 million

* Say U.S. packers hold cost advantage

By Rod Nickel

WINNIPEG, Manitoba, Nov 4 (Reuters) - Canadian beef packers are asking the federal government for an annual payment of C$26 million ($24.5 million) to cover the cost of disposing of risky cattle parts under stringent health rules aimed at preventing the spread of mad cow disease.

Packers want C$31.70 for each animal over the age of 30 months to cover the cost of disposing of specified risk materials (SRM), such as the brain, spinal cord, tonsils and other parts that are most likely to carry mad cow disease, a Canadian Meat Council official said on Wednesday.

U.S. packers are required only to dispose of the brain and spinal cord, at a much lower cost, and can use more cattle parts in livestock feed, said Brian Read, an executive with beef packer XL Foods and a representative of the Canadian Meat Council.

"(The cost difference) really affects (small packers), and the major packers as well," Read said. "It's just right in your face every morning."

A delegation of packers, farmers and renderers raised the need for aid on Tuesday with the House of Commons agriculture committee, made up of government and opposition legislators. The committee has not made any recommendation as yet.

The 2003 discovery of mad cow disease on a Western Canadian farm led to the federal government banning SRM materials -- the tissue where the disease concentrates -- from all animal feed in an effort to reopen export markets.

Cattle older than 30 months, such as dairy cows and breeding stock, are at higher risk of the degenerative disease, also known as bovine spongiform encephalopathy, than are the younger animals that make up the vast majority of herds.

Without government help to eliminate the added costs that packers pay, slaughter capacity could move elsewhere, Read said.

"(Government aid) just puts us on an equal playing field to the United States."

The biggest beef packers in Canada are Cargill Ltd [CARG.UL] and XL Foods, which compete with giants like U.S.-based Tyson (TSN.N) or Brazil's JBS SA (JBSS3.SA).

The cattle industry has other problems too, such as low prices for farmers, a volatile Canadian dollar and the U.S. country of origin labeling law, which has cut into Canada's cattle shipments to its biggest export market.

Several cattle-farming groups met on Wednesday with the opposition New Democratic Party to raise awareness of their need for government help.

($1=$1.06 Canadian) (Editing by Rob Wilson)