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Critical USDA functions operating during U.S. government shutdown – but agricultural community is wary

(PHOTO: Jim Allen/FreightWaves)

The third week of the partial Federal government shutdown is impacting U.S. agriculture. Without full funding, the U.S. Department of Agriculture (USDA) is not providing some real-time information, full financial support, or some critical services for farmers and ranchers.

The shutdown has been a contentious political issue since it began on December 22nd. No one knows when the shutdown will end, since the U.S. House of Representatives has indicated it will not send President Trump a budget that includes funding for his proposed border wall.

While prices for agricultural products are not expected to be significantly altered in the short term, an extended shutdown coupled with ongoing trade tensions could  impact the ability for farmers to operate in the domestic and international marketplace. “I don’t think at this point it [the government shutdown] will materially impact actual production in 2019,” said University of Illinois agricultural economist Dr. Scott Irwin. “Unless this shutdown stretches for several more months.”

On December 21, USDA Secretary Sonny Perdue stated, “There may be a lapse in funding for the federal government, but that will not relieve USDA of its responsibilities for safeguarding life and property through the critical services we provide. Our employees work hard every day to benefit our customers and the farmers, ranchers, foresters, and producers who depend on our programs. During a shutdown, we will leverage our existing resources as best we can to continue to provide the top-notch service people expect.”

According to the department, some USDA activities are shut down or significantly reduced and some USDA employees have been furloughed. However, certain USDA activities are continuing because they are related to law enforcement, the protection of life and property, or are financed through available funding (through mandatory appropriations, multi-year discretionary funding, or user fees). For the first week of the shutdown, 61 percent of employees were either exempted or excepted from shutdown activities. As the shutdown has continued, this percentage has decreased, and activities are being reduced as available funding decreases.

USDA activities that are continuing 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.
• Inspections for import and export activities to prevent the introduction and dissemination of pests into and out of the U.S, including inspections from Hawaii and Puerto Rico to the mainland.
• U.S. Forest Service (USFS) law enforcement, emergency and natural disaster response, and national defense preparedness efforts.
• USFS employees will continue to work on managing and maintaining the current forest system lands and sustaining the health and safety of the lands for their continued use.
• Continuity and maintenance of some research measurements and research-related infrastructure, such as germplasm, seed storage, and greenhouses.
• Care for animals, plants and associated infrastructure to preserve agricultural research and to comply with the Wild Horses and Burros statute.
• Eligible households will still receive monthly Supplemental Nutrition Assistance Program (SNAP, or “food stamp”) benefits for January.
• Most other domestic nutrition assistance programs, such as the Commodity Supplemental Food Program, WIC, and the Food Distribution Program on Indian Reservations, will continue to operate at the state and local levels with any funding and commodity resources that remain available. Additional Federal funds and commodities will not be provided during the period of the lapse.
• The Child Nutrition Programs, including School Lunch, School Breakfast, Child and Adult Care Feeding, Summer Food Service and Special Milk will continue operations into February. Meal providers are paid on a reimbursement basis 30 days after the end of the service month. Carryover funding will be available during a lapse to support FY 2019 meal service.
• Minimal administrative and management support, including to excepted IT systems and contracts, will be maintained to support the above activities.
• Provision of conservation technical and financial assistance (such as Conservation Reserve Program, Environmental Quality Incentives Program, and easement programs).
• Some farm payments (including direct payments, market assistance loans, market facilitation payments, and disaster assistance programs) were continued for the first week of the shutdown.
• Market Facilitation Program payments.
• Trade mitigation purchases made by USDA’s Agricultural Marketing Service.
• Agricultural export credit and other agricultural trade development and monitoring activities.
• USDA’s Market News Service, which provides critically important market information to the agricultural industry.

The following USDA activities have been shut down during the government funding lapse:
• Provision of new rural development loans and grants for housing, community facilities, utilities and businesses.
• All recreation sites across the U.S. National Forest System, unless they are operated by external parties under a recreational special use permit.
• New timber sales.
• Most forest fuels reduction activities in and around communities.
• National Agricultural Statistics Service (NASS) statistics, World Agricultural Supply and Demand Estimates report, and other agricultural economic and statistical reports and projections.
• Investigation of packers and stockyards related to fraudulent and anti-competitive activities.
• Assistance for the control of most plant and animal pests and diseases unless funded by cooperators or other non-appropriated sources.
• Research facilities except for the care for animals, plants and associated infrastructure to preserve agricultural research.
• Provision of new grants or processing of payments for existing grants to support research, education, and extension.
• ERS Commodity Outlook Reports, Data Products, research reports, staff analysis, and projections. The ERS public website has been taken offline.
• Most departmental management, administrative and oversight functions, including civil rights, human resources, financial management, audit, investigative, legal and information technology activities.
• Mandatory Audits (Financial Statements, FISMA, and potentially Improper Payments) will be suspended and may not be completed and released on the date mandated by law.
• Farm loans and some farm payments (including direct payments, market assistance loans, market facilitation payments for those producers who have not certified production, and disaster assistance programs).

The USDA announced on January 4 that the NASS report and the World Agricultural Outlook Board report will be suspended for the foreseeable future. The reports, along with the annual summary of U.S. crop production, were originally scheduled to be released on January 11th.

“Without that baseline of the USDA data, I think the market might have a bit wider swing in prices,” said Irwin. The market for agriculture could become more volatile without data provided by the USDA. These reports are necessary for traders to forecast crop futures. Farmers also rely on the data to plan their seasonal planting and harvesting.  

Another consequence of the government shutdown is the contraction of the USDA’s workforce. A shutdown plan summary released by the USDA on December 28th revealed that 43,959 employees – 46 percent of the total workforce – have been on furlough since the shutdown began. According to the Washington Post, the top 10 states where workers furloughed by the shutdown are include Alaska, Montana, Wyoming, New Mexico, South Dakota, West Virginia, Idaho, the District of Columbia, Maryland and Virginia.

The only agency within USDA to be fully staffed is the Natural Resources Conservation Service. The Food Safety and Inspection Service and the Agricultural Marketing Service are currently staffed at 89 percent. The USFS and Animal and Plant Health Inspection Service are staffed at 67 percent and 69 percent respectively. The Hazardous Materials Management Agency is staffed at 50 percent, while all other USDA agencies currently have more than half of their employees out on furlough.

The 2018 farm bill (The Agriculture Improvement Act of 2018) reauthorized many expenditures in the prior United States farm bill (the Agricultural Act of 2014). The $867 billion farm bill was passed by the Senate on December 11, 2018, and by the House on December 12. USDA’s budget for 2019 is slated to be around $139 billion, with $18 billion for discretionary spending and $122 billion for mandatory programs.

According to the American Farm Bureau Federation (AFBF), there are 2.1 million farms in the United States, providing income for two percent of the population. About 39 percent of farms receive direct subsidies with a focus on those producing corn, soybeans, wheat, cotton, and rice.

Closure of local Farm Service Agency (FSA) offices due to lack of federal funding is the biggest concern for the AFBF. Direct assistance to these farms is currently being delayed without the offices in operation.  

“Farmers, ranchers, and rural communities rely on many programs and as this partial shutdown continues that impact is going to continue to become more and more prominent,” said R.J. Karney, AFBF director of congressional relations. “From the Farm Bureau’s perspective, we haven’t endorsed any legislation that’s being proposed, but with the closure of many local farm agencies, we’re noticing that the shutdown is going to distract the new Congress and the Administration from concentrating their efforts on new legislation and trade deals that are critically import to farmers, ranchers and rural communities with their economic recovery as well.”

AFBF’s concerns are echoed by others. The uncertainty created by the shutdown is making agricultural producers apprehensive about the future. That’s according to Terry Detrick, an Ames, Oklahoma farmer and president of American Farmers & Ranchers/Oklahoma Farmers Union (AFR/OFU), one of Oklahoma’s major farm organizations with more than 60,000 members.
“The longer the shutdown continues the greater the impact will be,” Detrick said. “We’re concerned about our farmers and ranchers having access to vital government programs through FSA offices. As we start the new year, farmers and ranchers must start making plans for the upcoming growing season. Oklahoma is the number one state in the nation for processing farm loans. With shuttered FSA offices, they cannot accommodate farmers’ needs.”
Detrick said the government closure is also affecting the new farm bill. “The USDA personnel that are supposed to be writing the new rules for implementing the farm bill are currently furloughed.”
Meanwhile, livestock need to be cared for and the feed bills need to be paid. Detrick said life continues at a busy pace on today’s farms and ranches regardless of the shutdown. This means expenses keep piling up. Producers operating with FSA loans cannot get their money in time to pay bills and are being hurt the most from this shutdown. “We strongly urge Congress and President Trump to work out a solution as soon as possible,” Detrick said.

Part of the 2018 farm bill included $12 billion to assist farmers affected by retaliatory Chinese crop tariffs, offsetting losses sustained in foreign markets. The deadline for farmers to apply for the aid was originally January 15th, but USDA offices where farmers could apply have been closed since December 28th. Secretary Perdue announced on Tuesday that the deadline for application would be extended by the number of business days government offices remain closed.

U.S. Sen. Chuck Grassley of Iowa, a family farmer, member of the Senate Agriculture Committee and incoming chairman of the Senate Finance Committee, released a statement in the wake of Secretary Perdue’s announcement. In part it said: “This was an issue my office has been in contact with USDA about. I appreciate Secretary Perdue’s willingness to make this very reasonable accommodation. Farmers who haven’t been able to apply for trade assistance would’ve missed the deadline through no fault of their own. It’s worth recognizing that farmers applying for assistance in the first place are hurting because of a trade war they didn’t start.”

Agriculture is a significant U.S. export valued at $135.5 billion in 2016, or 6 percent of total national exports. More significantly, agricultural exports provide 20 percent of U.S. farm income. The 2018 farm bill is slated to provide $235 million to programs which promote agricultural trade and facilitation.

“What the agriculture world is focusing on right now is the lack of export demand, especially to China,” said David Solenson, a senior director of Congressional Relations with the AFBF. “That’s affecting different parts of the country. For the northern Midwest states that mostly export out through Pacific ports because of Chinese demand, that trade pretty much stopped, so the product’s just sitting there.”

Until the shutdown is resolved, America’s agricultural community will continue its daily activities. However, there is little doubt that most in that community hope the shutdown ends very soon.

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