SIOUX CITY - Hog farmers like Bill Tentinger, of Le Mars, Iowa, had been expecting the futures market to rally this spring.
Instead, Tentinger and other livestock producers are facing uncertainty as a result of the automatic federal budget cuts known as sequestration. The U.S. Department of Agriculture had been facing the possibility that federal meat inspectors would have to take up to 11 furlough days as part of the funding reductions.
The cuts were spared after lawmakers last week agreed to move $55 million to the Agriculture Department's Food Safety and Inspection Service. The plan extends funding to Sept. 30. President Barack Obama is expected to sign the legislation.
SIOUX CITY JOURNAL PHOTO
Pork producer Bill Tentinger pours some feed while standing in a pen of crossbred gilts at his rural Le Mars, Iowa, farm March 21. Tentinger says that the possibility of USDA meat inspector furloughs is moving the pork markets.
But U.S. Sen. Tom Harkin, D-Iowa, said during a conference call that the sequester cuts will probably continue. The sequester is the result of an agreement in August 2011 that triggers across-the-board, automatic budget reductions in various government agencies if certain cuts and revenue growth isn't reached.
Reduced budgets continue for 10 years, meaning there's still concern, Harkin said.
"The real question is, will we be able to hammer out a number of appropriation bills this summer for next fiscal year and reach those agreements so that we can lift the sequester for next year?" he said.
Before Congress reached an agreement on the meat inspectors, Tentinger, who finishes 8,000-10,000 hogs annually on his farrow-to-finish operation, said the uncertainty has caused hog market futures to drop.
"There's a psychological effect on the market, and that's already happened," he said. "It seems like every time our secretary of agriculture (Tom Vilsack) steps to the microphone and talks about it, the futures market goes down."
Tentinger said the futures market is down $12-$15.
"A $10 drop in the futures market adds up to $25 a hog, and that's a lot of money," said Tentinger, a past president of the Iowa Pork Producers Association.
Cattle producers, too, have seen futures prices drop. Eric Nelson, who finishes 2,000 head a year on his Moville, Iowa, farm, said there are many possible causes, but sequestration is definitely one of them.
"The banter about this has caused prices to drop," Nelson said.
U.S. Agriculture Secretary Tom Vilsack said he sympathizes with producers worried about the impact of the inspector furloughs on their operations.
"Nobody is more concerned about this, more stressed out about this than I am," Vilsack told the Journal earlier this month. "It's frustrating that Congress has created this sequestration. It's frustrated that people's lives will be adversely affected."
He said 87 percent of the department's food safety budget is for inspectors' wages and benefits for inspectors.
Meatpackers have developed contingency plans in case the inspector furloughs eventually happen, said Gary Mickelson, a spokesman for Tyson Foods, which operates beef plants in Dakota City and Denison, Iowa, and a pork plant in Storm Lake, Iowa.
"We're working with industry, labor and consumer groups to help USDA meet its sequestration requirements while continuing to provide necessary public health and industry certification services," Mickelson said in a statement.
Despite the uncertainty and frustration, Nelson isn't ready to concede that this will be a tough year for producers.
"The cattle business is a rough-and-tumble business, and fortunes can change quickly," he said.