January 10, 2019

US government shutdown curtails USDA services, plunges agriculture sector into uncertainty

The current US government shutdown has curtailed some services of the USDA, but this development will not "impact actual [agricultural] production in 2019," unless the shutdown goes on "for several more months," said University of Illinois agricultural economist Dr. Scott Irwin.

Nevertheless, due to disrupted government funding, the USDA is not able provide some real-time information, full financial support or critical services for farmers and ranchers. The situation may exacerbate as the White House and Democrats are in a deadlock over US President Donald Trump's demand for a border wall funding, which the Democrats continue to deny.

According to FreightWaves, prices of agricultural products will not be seriously affected in the short term. However, a protracted shutdown, together with trade tensions with China, will hamper farmers' ability to operate in both the US and international markets.

For now, the USDA is still offering some services, with USDA Secretary Sonny Perdue saying that the agency will utilise its resources "to continue the top-notch service people expect."

Certain USDA activities - with some backed by available funding - continues to run, as these are mainly related to law enforcement and the protection of life and property. But more USDA service will be impacted as the number of available staff drop in tandem with depleted funding.

Currently, USDA activities (amongst others) still functioning in the short term include: meat, poultry, and processed egg inspection services; grain and other commodity inspection, weighing, grading, and IT support services funded by user fees; agricultural export credit and other agricultural trade development and monitoring activities; and USDA's Market News Service, which provides critically important market information to the agricultural industry.

In addition, the Food Safety and Inspection Service and the Agricultural Marketing Service are still running at 89% of available staff.

Still, the shutdown has affected funding for US farms that need such an aid. About 39% of the  2.1 million farms in the States get direct subsidies, especially for those that produce corn, wheat, cotton and rice.

As the Farm Service Agency (FSA) is closed with the lack of federal funding, this development has delayed direct assistances to farms.

And it could only get worse for businesses within US agricultural sectors if both White House and Democrats - which occupy a majority of the US House of Representatives - cannot agree to a way forward to reopen government services.

"...with the closure of many local farm agencies, we're noticing that the shutdown is going to distract the new Congress and the [Trump] Administration from concentrating their efforts on new legislation and trade deals that are critically important to farmers, ranchers and rural communities with their economic recovery as well," said RJ Karney, American Farm Bureau Federation's (AFBF) director of congressional relations.

Also affected by the shutdown is the new US farm bill that the USDA is "supposed to be writing new rules" for, but the staff tasked with this work are "currently furloughed," said Terry Detrick, president of American Farmers & Ranchers/Oklahoma Farmers Union (AFR/OFU).

Furthermore, farmers could not apply for aid pertaining to the 2018 farm bill which included US$12 billion to support farmers affected by China's crop tariffs. USDA offices remain closed since late December. The deadline for farmers to apply for the aid - which would be extended due to the shutdown - was originally January 15.

It is still business as usual for US farms, even as the possibility of mounting debts increase due to producers not getting the FSA loans they need to pay the bills.

"We strongly urge Congress and President Trump to work out a solution as soon as possible," Detrick said.

- FreightWaves