Federal budget cuts will hurt the nation’s farmers, from reduced dairy exports to fewer loans to potential shutdowns at meat and poultry plants, U.S. Agriculture Secretary Tom Vilsack said.
And that could drive up food costs for consumers.
He couldn’t provide details on how the so-called sequestration cuts would affect Wisconsin farmers specifically, Vilsack said Wednesday in a phone interview with the Tribune. But noting the importance of dairy exports, he said they could plunge by $500 million because of reductions in the USDA’s promotional budget.
La Crosse County dairy farmer Thomas Schaub lamented any loss of exports.
“That’ll definitely create more of a surplus here at home, which will further depress prices,” said Schaub, who milks 70 Holsteins on his Jewel View Farm near Rockland.
The debate over sequestration and confusion over its effects are two of the hottest topics in Washington, D.C., these days. President Barack Obama and Democrats blame Congress, while Republican members of Congress assail the administration for not reaching an accord on the nation’s budget deficit before across-the-board cuts started taking effect Friday.
“Congress hasn’t done its job,” said Vilsack, a former Iowa governor who has been Obama’s ag secretary since the beginning of his presidency.
That lack of action also will trim some direct USDA payments to farmers, Vilsack said. For example, dairy producers stand to lose 5 to 6 percent of what they would have received under the Milk Income Loss Contract, he said.
That subsidy provides dairy farmers with direct payments when market prices drop too low. It paid an estimated $83 million to nearly 12,000 Wisconsin farmers last year.
“It’ll definitely affect farmers adversely now because feed prices are so high that any loss of income will hurt,” Schaub said. “It’s not tremendous, but it will be adverse because the market is so tight.”
Meat plants could be shut down
Sequestration also is expected to slice $34 million from the USDA’s pool for farm loans, Vilsack said.
That would be a blow to start-up farmers, Schaub said, adding, “It will hinder anybody wanting to get into the business.”
A move that will affect not only the production side of the food chain but also the consumer end is the threatened temporary closings of 6,300 meat and poultry plants nationwide that ship their products across state lines.
The shutdowns will be necessary when the USDA furloughs 9,000 inspectors for 11 days as a budget-cutting measure, Vilsack said.
“It’s not likely that production would continue in those plants,” he said.
The furlough periods have not been set yet because of technical delays in putting them into effect, but they are expected to be spread out between July and August, he said.
Again, though, confusion about sequestration generates uncertainty at businesses such as GNP Company, a St. Cloud, Minn.-based poultry company formerly known as Gold’n Plump.
GNP has 1,600 employees, including 500 at its Arcadia plant, which processed nearly half of the company’s 100 million chickens last year.
“Like everybody else in the industry, we are waiting for it to unfold because they still are not able to help us understand the details of how it will affect us,” said Lexann Reischl, GNP’s corporate relations manager.
Hopefully, a budget solution can be reached before the furloughs are necessary, she said.
That’s always a possibility, Vilsack said. “I want to continue to be optimistic about it. But we really need Congress to do its job. … There is so much uncertainty.”
Farm bill stalled
If sequestration continues, conservation efforts for farmers and other land owners will suffer because the USDA’s Natural Resources Conservation Service won’t be able to fill 400 positions it needs to serve them, the ag secretary said.
About 2,600 farmers won’t be able to get conservation plans, and 11,000 to 12,000 plans already created won’t be able to get financing, he said.
Vilsack and farmers alike agree that the sequestration morass adds stress to the continued stalemate over a new farm bill. Although legislators extended part of the bill early in January, a new five-year bill remains stalled.
Sequestration “takes a lot of energy and focus away from the farm bill,” Vilsack said.
“It’s very frustrating that we still don’t have a farm bill,” Schaub said. “Banks and farm service agencies don’t know what programs will be around, and it’s very frustrating for them and for us.”