Ontario farm organizations monitor U.S. government shutdown

Thursday, October 3, 2013

by SUSAN MANN and MATT MCINTOSH

Ontario producer organizations are being stymied in their efforts to get market information from the United States Department of Agriculture due to the partial shutdown of the American government.

Jean-Phillippe Gervais, chief agricultural economist with Farm Credit Canada, says the big implication so far of the shutdown is “we don’t have the market information that the USDA (United States Department of Agriculture) delivers.” But currently that isn’t a big deal.

If the situation persists into next week, however, “it’s going to be interesting to see what’s going on in the markets because markets don’t like to be in the dark and right now they are.” That’s especially true for commodity markets, he notes.

The partial shutdown of American government services, with more than 700,000 federal employees on unpaid leave, began Oct. 1 after the two houses of the U.S. Congress failed to agree on a new budget before the government’s fiscal year began. It’s the first government shutdown in 17 years.

Ontario pork prices are temporarily being based off of old numbers and exchange rates because of the shutdown. Prices for pork are normally determined by data released through the USDA, such as the daily hog slaughter volumes.

With the USDA not releasing any new numbers, the pork prices are being determined using other means. The entire USDA website has been shut down with a message on the site saying that “due to a lapse in federal government funding, this website is not available.”

Ron Verhoeven of Ontario Pork's marketing division says "Monday was the last day we received price information from the USDA, so we've been taking those numbers and numbers from last week and factoring in with the current day's exchange rate. Combining those two things gives us 100 percent of the current day’s price."

This procedure, Verhoeven explains, will be used until next week. Should the government shutdown continue past that, alternative measures will have to be adopted.

"We are currently working with pork processors and other provinces to develop a plan in case the U.S. government doesn't reconvene, and we should be done early next week," he says." Some states are even thinking about voluntarily releasing reports to help keep things on track."

The Ontario Cattlemen’s Association can’t access the information it collects on boxed beef prices and import/export statistics, notes communications manager LeaAnne Wuermli. The association’s staff needs those numbers to do their daily and weekly reports.

But so far the U.S. government shutdown has had little impact on Ontario beef farmers themselves, she says. “To our knowledge, the inspection and border access has remained the same.”

George Gilvesy, general manager of the Ontario Greenhouse Vegetable Growers, says by email the government shutdown hasn’t seriously impacted their farmers either “but we are monitoring it with the assistance of the Canadian government.”

Gervais says more than $13 million worth of crops go to the United States from Canada daily. That number doesn’t include livestock.

“We have a vested interest in seeing this border remains open so that trade flows are smooth,” he notes.

Mark Wales, president of the Ontario Federation of Agriculture, says anything that disrupts the recovery of the U.S. economy “will eventually affect Canadian agriculture.” As for what effect the shutdown will have if it continues, he notes it will cause “a further drifting downward of corn prices because corn prices are already bad enough.”

Patrick Girard, senior media relations officer with Agriculture and Agri-Food Canada, says by email that the majority of the U.S. agriculture department’s food safety and inspection staff workforce remains on the job and that means meat processing can continue uninterrupted. Most import and export functions will continue throughout the shutdown, including meat, poultry and produce inspections and foreign animal disease control.

Gervais says the USDA is scheduled to release its monthly report on available crop supplies and projected demand on Oct. 11. “That’s a critical time of the year for the agricultural industry” with farmers wanting to know the size of the current crop.

If people don’t get the information they’d normally get from that Oct. 11 report, the “market starts relying on secondary data and I would expect the markets to be a lot more volatile than they usually are,” he explains.

“It’s not unusual for prices to move up and down quite a bit following that report because that’s how critical it is,” he explains. The report “is the best thing that there is out there to understand what’s going on in the market.”

Canada relies on the U.S. market to buy its products but it also relies on the Americans to “tell us what’s going in the markets because it’s really just one market” for products, such as beef, pork, fruits, vegetables and grains, he states.

Another situation looming in the United States is the approaching Oct. 17 deadline the government has to extend its borrowing limit. Gervais says he doesn’t expect the United States will default in its payments “and I think they will come up with an agreement” to extend that limit. BF