* Fed budget cuts seen snarling food supply chain
* Meat inspector furlough notices to be sent this wk-Ag Sec
* Sequestration affect on US grain inspections minimal
By Theopolis Waters and Michael Hirtzer
CHICAGO, March 5 U.S. farmers and agribusiness
companies are worried that across-the-board federal budget cuts
will snarl the supply channels for everything from milk and
broiler chickens to grain shipments, but many are hopeful that
the Obama administration and Republican opponents will find a
compromise before major disruptions hit the food system.
Most immediate concerns center on federal meat inspectors at
U.S. meat plants, who must be present by law for animal
slaughter and meat processing to take place. U.S. Agriculture
Secretary Tom Vilsack said the U.S. Department of Agriculture's
meat safety agency would have to furlough its 8,400 inspectors
for 11 to 12 days to compile the savings required under the
automatic federal budget cuts.
There are also concerns about grain inspection at ports and
key jobs in transportation, such as the Army Corps of Engineers,
which operates hundreds of river locks and dams for grain barge
Given the importance of the U.S. food system - food exports
regularly post a huge trade surplus and food inflation is a key
bellwether for government policymakers - agribusiness executives
and officials said they expected the government to think
carefully to minimize disruptions to food supplies.
"Even in the scenarios being discussed in the press,
inspector services would not be affected for a few months,"
Thomas Super, vice president of communications at the National
Chicken Council said, referring to USDA meat inspectors at
broiler packing plants.
"Because sequestration cuts must be spread over the next
seven months, opportunity remains to resolve the budget crisis
before inspectors are furloughed," he said.
Super said NCC and about 40 other meat, poultry, food and
grocery manufacturing and restaurant associations sent a letter
to Vilsack underscoring their concerns about furloughing of USDA
food safety inspectors due to the "sequester" automatic cuts
that went into process on Friday.
USDA says no furlough notices have been issued to meat
inspectors or any USDA department, but Vilsack told the U.S.
House Agriculture Committee on Tuesday the agency will send
furlough notices to meat inspectors this week although it will
be "several months" before they occur.
Dave Warner, a spokesman for the National Pork Producers
Association, said: "Meat inspection should be maintained to
protect the public health by ensuring the safety of the U.S.
meat supply. Should inspectors be furloughed, that action would
have a huge negative impact on hog farmers, meat packers and
processors, food retailers and restaurants and consumers."
POSSIBLE PROCESSING PLANT SHUTDOWNS
By law, slaughterhouse activities cannot proceed without
USDA-employed inspectors on hand. A mass layoff of inspectors
would shut down nearly 6,300 meat packing and processing
facilities because companies cannot ship meat that lacks the
USDA inspection seal. The White House estimates the industry
would lose $10 billion in production with just a two-week
shutdown. Retail and wholesale meat prices would be expected to
"Because meat inspection has historically been considered
'essential' by the federal government, we're optimistic there
will be no interruption in this public health and safety
function. We do not expect any immediate impact on our
business," said spokesman Gary Mickelson of Tyson Foods,
the largest U.S. meatpacker.
USDA's Agricultural Marketing Service, which generates
prices used as benchmarks for livestock futures at the CME Group
Inc, and essential agribusiness needs like the federal
grain inspection service are also at risk of slowdowns or
"I don't believe it's going to be an issue because there are
a lot of ways within USDA to cut the budget without having to
furlough meat inspectors," said Dan Norcini, a livestock futures
trader at CME. "All of these fears are overblown and quite
frankly I don't put any stock in any of that talk."
U.S. grain export associations, lacking details on
government's furlough plans, have been mostly silent so far on
how grain inspections and export trade would be affected.
But federal government workers are everywhere in the food
chain, from operations of locks and dams on U.S. rivers to
oversight of rail shipments to quality control of food imports
for contamination from pesticides and other chemicals.
Randy Gordon, president for the National Grain and Feed
Association, said his group, which includes hundreds of grain
handlers, was confident that grain inspections at U.S. gateway
ports including New Orleans or Portland, Oregon, would have
business as usual.
"Our understanding is that sequestration's impact on daily
official grain inspection and weighing services performed by
USDA's Grain Inspection, Packers and Stockyards Administration
will be minimal, as these services are financed almost
exclusively through industry-paid user fees," Gordon said,
adding that NGFA is most concerned about the potential impacts
to livestock operators given the group's delivery of massive
feed rations to beef, swine, poultry and fish farms.
"We're also monitoring the impact on the Department of
Homeland Security's Customs and Border Protection agency, given
the importance of these inspectors in clearing imports of feed
ingredients some grain commodities, particularly containerized
vessel imports," Gordon said.