U.S. Secretary of Agriculture Tom Vilsack acknowledged that last year's drought focused a lot of attention on managing and mitigating risks farmers cannot control as he led off USDA's 2013 Agricultural Outlook Forum on managing risk in the 21st century. The big uncontrollable risk is weather.
Vilsack immediately shifted to discussing manmade risks.
"Uncertainty with respect to the federal budget and the pending sequester, if unresolved, will impact every American," he declared. "If March 1 comes, and no action is taken, every line item of our budget will have to be reduced by somewhere near 5% to 6% on a fiscal year basis. We must implement the cuts over the remaining portion of the fiscal year, which effectively equates to 10% to 12% cuts for the rest of the current fiscal year.
"Congress has written a direct prescription to reduce every line item by the same amount," he adds. Agencies where almost all lines involve people have very little flexibility. Cuts in food safety inspections will impact all food processing plants and all consumers.
"Congress can avoid the sequestration by agreeing on cuts," stated the Secretary. He suggested Outlook Forum participants should contact their legislators and urge them to act.
"Congress can solve the problem," he reiterated. "If Congress fails to act, USDA will do what we have to do to cut spending. If we do not, civil and possibly criminal penalties may apply. This is a risk that is manmade."
Suppose lawmakers dodge this manmade crisis.
"The same thing could happen again on March 27," noted Vilsack. "If congress fails to come to budget agreement by that date, all government activity will come to halt. Such a shutdown would impact ag credit availability, food inspections, export programs--virtually everything government does."
Lack of farm bill adds more manmade uncertainty
"Not having a five-year farm bill creates uncertainty on the part of farmers as to what the safety net will be if we have another drought," says Vilsack. "No bill means livestock producers have no assistance similar to what was available under the expired legislation.
"I refer to it as the food, farm and jobs bill," stated the secretary. "We are a nation that feeds itself. A food, farm and jobs bill makes us a stronger and more secure nation
"However, if we are to create vibrant rural communities we need to compliment food production with other agricultural processing activities and promote development of renewable source of energy and bio-economy products in rural America," he says. "Those advances are all possible. Passing a new five-year food, farm and jobs bill can help make them possible and do it sooner."
Labor uncertainty creates ag risk
Agriculture needs labor. "Everyone in this room understands that not all of that labor is legal," Vilsack told forum participants. "It is important to have immigration reform. We need a comprehensive set of reforms that secure our borders, put responsibility on folks who are here to pay penalties and pay back taxes and get on the path to be here legally.
"Doing so will help keep us on the path of having the most reasonably-priced food in the world," he stated. "Here 10% of paycheck goes to food. Consumers in other countries spend 20%, 30%, 40% and in some cases 50% of their earnings on food.
"All of these are manmade risks to agriculture and can be solved if Congress will do its job," declared Vilsack.
Some manmade risks—specifically trade barriers--will need international assistance to solve.
U.S. livestock markets face pressure from China moving toward third-party testing of pork shipments from the U.S. to verify meat is free of the feed-additive ractopamine, which is used to produce lean muscle in hogs instead of fat.
Japan recently shifted to allow imports of beef from animal up to 30 months of age. Mexico and Hong Kong are also considering relaxing some restrictions which would open a wider market for U.S. beef.
None of this would be possible without congressional action to empower U.S. negotiators to negotiate and without co-operation from international trading partners.