March 6, 2013 / 10:27 PM / 5 years ago

Leaked e-mail leads traders to fear worst from USDA furloughs

WASHINGTON, March 6 (Reuters) - A leaked Agriculture Department e-mail briefly rattled the U.S. livestock market on Wednesday as traders treated it as an omen for meat packers due to budget cuts that could furlough thousands of U.S. meat inspectors later this year.

Agriculture Secretary Tom Vilsack has said USDA will cushion the impact on the meat industry and consumers as much as possible. Still, there could be brief plant-by-plant shutdowns and spotty meat shortages, although months in the future.

The memo, from an official at USDA’s animal and plant health agency, was circulated by some Republican lawmakers and viewed by traders as evidence that the Obama administration wants the so-called budget sequester to be as disruptive as possible.

USDA funding for the 2013 fiscal year that ends Sept. 30 was cut by $1.9 billion, or about 5 percent, by the reductions that took effect on March 1.

Officially, USDA says it is working to minimize the impact of cuts. “If we can find a way to do something to reduce the impact of the sequester, we will do it,” USDA spokeswoman Courtney Rowe told Reuters.

Uncertainty over potential meat inspector furloughs is said to have contributed to weak U.S. cattle and hog markets this week, although other factors, including selling by large investment funds and weak demand for pork, have also weighed on sentiment.

By law, meat plants cannot operate without USDA inspection. Packers would buy fewer animals and produce less hamburger, pork and chicken during a furlough. USDA says inspectors would be furloughed for a total of 11 or 12 days each but the days off would be non-consecutive and it would try to minimize the impact on packers and processors.

In the leaked e-mail, dated Monday, a USDA regional wildlife services manager said budget officials rebuffed his question about latitude to avoid furloughs and told him “make sure you are not contradicting what we said the impact would be.”

Rowe, the USDA spokeswoman, said the memo showed USDA tried to be flexible but in this case, the manager raised an idea that had already been counted toward budget savings.

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