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Government shut down hurting U.S. agriculture


The federal government shutdown could wreak havoc on U.S. agriculture and the rural economy as farmers wait on subsidy payments, loans and data they need now to make plans for the spring.

As a result of the shutdown, applications are now on hold for a $12 billion emergency aid package Trump and the Department of Agriculture announced for farmers hurt by retaliatory tariffs from China and other nations.

A Jan. 15 deadline for that program may have to be extended.  

That’s a significant barrier to Midwestern ag, whose two biggest crops — corn and soy — have been hit particularly hard by Trump’s trade war and rely heavily on federal government subsidies to remain profitable.

Some close observers of California farming, however, say the shutdown’s effects are limited in the Golden State — so far.

“(California growers) are used to operating with limited federal government oversight,” said Joel Nelsen, California Citrus Mutual CEO and USDA adviser. “Here in California, we have such a robust CDFA (California Department of Food and Agriculture) that we aren’t missing the federal government yet.”

Josh Rolph, California Farm Bureau’s manager of federal policy, agreed. 

“The shutdown will have no big impact (on California ag) in the short-term,” he said. “Most growers are not directly affected unless they’re getting tariff or commodity payouts.”

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Nelsen says he’s more worried that the shutdown is a distraction for larger, existential threats impacting the ag economy in California and across the country.

“(During the shutdown) we likely won’t see trade negotiations, no breaking down of trade barriers,” Nelsen said. “That’s a bigger problem.”

Nelsen said local farmers so far have dismissed the shutdown as political theater. 

“As long as we’re not feeling any pain, we’re ambivalent,” he said of Central Valley farmers. 

If the shutdown continues, as Trump has promised it could for “months or even years” if border wall funding demands aren’t met, it could put an end to sunshine and green pastures for California ag. 

“It’s a bad deal. The entire operating budget of the USDA is at stake,” Nelsen said. “(If the shutdown continues) We would have to ask the state to declare a state of emergency, which would put a greater burden on the ag commissioner and county offices.”

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Tough times for farmers 

Farmers count on the USDA for a wide range of services, many of which are now suspended during the shutdown that began Dec. 22.

It’s especially troublesome as farmers have been caught in a downward spiral of lost markets, low prices for milk, crops and livestock. Also, the shutdown threatens the implementation of the 2018 farm bill and its program aimed at helping small dairy farms endure one of the worst downturns in the dairy industry in recent memory. 

The rules and policies to put the massive piece of legislation in place are largely written by USDA employees at many levels. 

And that’s a mad scramble.

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“They really work hard to get all that in place as quickly as possible,” said Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison.

The shutdown is “coming at a bad time, for sure,” Stephenson said.

USDA isn’t “writing the checks or doing the things to get payments out to dairy farmers, corn and soybean growers. So that’s a problem,” he added.

When farmers are hurting, it’s felt throughout the rural economy.

Each dollar of net farm income results in an additional 60 cents of economic activity as farmers spend money in their local communities, according to University of Wisconsin research.

That translates to millions of dollars in urban centers as well since most of the items farmers buy come from other places. 

And to some degree, farmers are gamblers. They borrow money in the spring to plant crops, betting that the fall harvest will cover their loans and generate a profit. They borrow money to raise livestock, hoping the price they receive when the animals are sent to market will be sufficient. 

“There are a lot of farmers who count on FSA loans to pay bills. And that works its way through the community,” said Jim Goodman, a board member of the Wisconsin-based group Family Farm Defenders who recently retired after 40 years of dairy farming.

During the shutdown, the government continues to inspect meat, poultry and eggs. It’s also releasing data needed for setting farm milk prices. 

Certain USDA activities will continue if they are related to law enforcement, the protection of life and property or are financed through available funding.

But a lot of farm data, necessary in forecasting global agricultural trends, isn’t getting processed and that could undermine commodities markets. 

“We have not seen export sales figures since the shutdown began. And it’s at a time when China supposedly has been making some new soybean purchases from the U.S.,” said Todd Hultman, a markets analyst with DTN/The Progressive Farmer in Omaha, Nebraska.

“It’s unfortunate that we’re not able to get confirmation in the markets. I think traders would have a little more confidence if they could see, in black and white, the reports from USDA about what sales are being made,” he said.

If the shutdown doesn’t end this week, Hultman said it’s likely the USDA will have to delay a major report, scheduled for Jan. 11, expected to contain data which influences global markets. 

“We are just a little bit in the dark at this time,” he said.

As traders, investors and farmers look ahead in 2019, many of their concerns remain the same as they were in 2018, said Alex Breitinger with Breitinger & Sons, a commodities futures brokerage firm based in Indiana. 

“Trade disputes with China, Mexico, and Canada still hang over all markets, especially major U.S. exports like grains, livestock and machinery. The United States seems to have won some battles in the ongoing trade wars, but the long-term damage suffered by both sides may exceed any gains notched so far,” Breitinger wrote in a recent column. 

Source: eu.visaliatimesdelta.com


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