UPDATE 1-Budget cuts may shut down meatpackers -White House
* Without USDA inspectors, meat plants would have to close
* Production losses of $10 billion possible
* White House ties budget cuts to everyday life (Meatpackers say USDA can avoid mass shutdowns)
WASHINGTON, Feb 8 (Reuters) - The Obama administration warned on Friday that across-the-board spending cuts set to take effect in March may result in furloughing every U.S. meat and poultry inspector for two weeks, causing the meat industry to shut down.
By law, meatpackers and processors are not allowed to ship beef, pork, lamb and poultry meat without the Agriculture Department's inspection seal.
The prospect of mass furloughs of meat and food inspectors was part of a broader White House warning about the effects of the potential spending cuts on everyday life. Meatpackers said a shut-down would devastate consumers as well as their industry.
President Barack Obama and congressional Republicans still must resolve differences over spending cuts and tax increases, dubbed the "fiscal cliff," which essentially was delayed by both sides from happening on Jan. 1 and was pushed back until March.
"USDA's Food Safety and Inspection Service may have to furlough all employees for approximately two weeks," a White House statement said.
An estimated $10 billion in production would be lost during a two-week furlough, said a USDA official, and consumers could see meat shortages and higher prices as a result.
Agriculture Secretary Tom Vilsack lamented across-the-board spending cuts during a speech to state agriculture directors earlier this week.
"There is not much we can do when Congress says to cut every line item by a certain percent," Vilsack said. He said employee pay accounted for the bulk of spending at the meat safety agency.
USDA spends about $1 billion on meat safety annually and has 8,400 inspectors at 6,290 slaughter and processing plants.
The American Meat Institute, a trade group, said the USDA should try to keep meat plants open while meeting targets for cuts, rather than going ahead with a mass furlough.
It said the agency could suspend non-essential programs and furlough employees other than inspectors to avoid "inflicting unnecessary hardship" on the meat industry.
A trade group for ranchers and cattle feeders said "food safety is a partnership" that requires government participation. "Our common goal is to ensure that inspections remain unhindered," the National Cattleman's Beef Association said.
Chicago livestock traders mostly viewed the White House threat as a budgetary bluff.
"Can you imagine the flak?" asked Joseph Ocrant, a trader who said he was skeptical the White House would pull inspectors out of plants for two weeks.
Americans consume more than 200 pounds (91 kg) of meat apiece each year, an average of slightly more than one-half pound a day. (Additional reporting by Theopolis Waters in Chicago; Editing by Ros Krasny and Paul Simao)