February 27, 2013 3:36 pm

US food shortages loom amid budget cuts

Trade groups are warning of widespread shortages of meat, poultry and eggs in the US as the meat industry braces for painful cuts that could cost it an estimated $10bn in lost production and $400m in lost wages.

The $2bn in automatic cuts to the US Department of Agriculture’s budget would cause it to furlough food inspectors for up to 15 days later this year at the country’s more than 6,000 meat and poultry plants, according to Tom Vilsack, agriculture secretary.


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Meat and poultry companies cannot process their products without passing federally mandated, continuous on-site department of agriculture inspections, meaning they would have to halt production. Exports and imports, too, would be stopped.

Last week, Sanderson Farms, the country’s third-largest chicken processor, in a regulatory filing called the prospect a “terrible situation” for the company.

Mr Vilsack made the prediction about the extent of production losses and lost wages in a letter earlier this month to the Senate committee on appropriations. The production gap could cause what restaurant and grocery trade groups have called the “first widespread shortage” of meat, poultry and eggs in decades.

In a letter to Mr Vilsack earlier this week, a group of 40 trade associations said the furlough would have “devastating trickle-down effects” on farmers who would have to bear the extra cost of feeding livestock meant for the slaughterhouse.

“You have to feed those [animals], and to the industry, it could be catastrophic cost-wise,” said Bob Goldin, of food industry research group Technomic. “Pegging production to these [feeding and growth] cycles is crucial to the economics of this business.”

The head of the National Cattlemen’s Beef Association in a statement earlier this month accused Mr Vilsack of “using America’s cattlemen and women as pawns in the agency’s political wrangling with Congress”.

“This action has already cost cattle producers significant amounts of money with the downward slide in the futures markets caused by rampant speculation,” Scott George said.

There is hope that the inspection cuts can be avoided. The department will have to give employees at least 30 days’ notice of the furlough after the March 1 sequestration deadline. Some are hopeful that during that time lawmakers will be able to work out a compromise, said Scott DeFife, head of policy for the National Restaurant Association.

If the sequestration is enacted in its current form, the USDA could spread out the furloughs over a longer period of time – say one day off every few weeks – and the effects on the meat and restaurant industries could be lessened, Mr DeFife said. But consumers may still feel the pinch.

“If they do it in increments, it will slow production but not halt it,” he said. “But it still could significantly drive up costs [for customers]” as the supply is constricted.

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