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The Beef Angle

Sequestration, USDA and the Beef Biz

From meat inspectors to inventory data, beef producers will feel the impact of the budget sequestration... eventually.

If you thought the "fiscal cliff" was the end of the story, you were wrong. Far from it, in fact, as March 1 brought forth a budgetary reality known as "sequestration." Dating back to the 2011 deficit-reduction talks between Congress and the White House, the sequestration, like the fiscal cliff, came about as part of a nuclear-deterrent of sorts, designed to be so frightening to both Republicans and Democrats that the parties would be forced to work together on reducing the massive shortfalls in the federal budget.

It didn't work.

You'll recall, of course, that Congress did move at the 11th hour to avert the cliff, essentially kicking the can down the road for two months on the spending-related items in the Budget Reconciliation Act of 2011 - the sequestration - and going ahead and raising taxes on the "wealthy," as well as letting the payroll tax holiday expire, meaning all of us who draw a paycheck are already paying more in taxes.

If you're not completely up to speed on the current budgetary debacle and the series of twists and turns that led to the cliff and the sequestration, go ahead and read Bob Woodward's book The Price of Politics. Do it now - I'll wait.

Let me give you the Cliff's Notes version: it's everybody's fault, Republicans and Democrats, House and Senate, Congress and White House. While one party or one branch tends to assign all the blame to the other, each facet of the political class involved in the 2011 talks failed in some way to deliver on the stated goals of reducing the federal deficit and getting the nation's fiscal house in order.

What does this have to do with beef producers? Lots. For starters, the chances of a Farm Bill passing the House this fiscal year aren't great, and the chances of a full, 5-year bill passing at all in this calendar year aren't much better. Increasingly, it looks like an extension of current federal farm policy is likely, especially with Democratic reaction to the latest budget proposal from House Republicans.

"This isn't serious." That was the concise assessment from House Agriculture Committee Ranking Member Collin Peterson (D, Minn.) upon reading the draft. The Paul Ryan-authored plan called for the Agriculture Committee to find $31 billion in budgetary "savings" over the next 10 years.

The Farm Bill, however, isn't actually the most pressing concern for cattlemen. Issue No. 1 appears to be the threatened furlough of Food Safety and Inspection Service meat inspectors. While lawmakers continue to press Secretary of Agriculture Tom Vilsack on this issue, the White House and Vilsack continue to push forward with plans to lay off federal meat inspectors due to the budget sequestration.

Vilsack told agriculture groups earlier this month that the lay-offs are still months away, but that he has very little discretion in how budget savings can be achieved under the terms of the sequester. Republicans, of course, argue that this approach is little more than political brinksmanship by an Obama administration loathe to cut any federal spending.

The latest casualty of the sequester appears to be a handful of statistical reports compiled and released by the National Agricultural Statistics Service (NASS). Earlier today NASS announced that it would suspend a number of statistical surveys and reports for the remainder of the fiscal year due to reduced funding caused by sequestration, among which is the July Cattle Report.

My Feedstuffs colleague Rod Smith shared with me that this is typically a fairly important report for the market and industry, though USDA says it choose the reports to suspend based on achieving the greatest balance between budget savings and delivering mission-critical data. Other affected reports included a number milk production and specialty crop reports.

When it's all said and done with, the pain of the sequester may be felt broadly across agriculture, which, as it turns out, is exactly what the measure was designed to do: spread the pain equally across the federal budget and the economy. While the Congressional Budget Office has estimated that the current cuts will shave 0.6 percentage points of growth off the economy this year, the sad truth is that the spending cuts discussed aren't actually nominal cuts, but rather cuts in the rate of growth to the federal budget.

Only in Washington, of course, do we discuss reduced increases in spending as economy-wrecking cuts.

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