The meat industry, which hit a two year high in exports to
Japan last week, apprehends a huge loss when inspectors are
furloughed by the U.S. Agriculture Department (USDA), according
to the proposed budget of the U.S. government in March 2013.
The spending cut and tax increases to cover the deficit by the
U.S. government was scheduled to begin in Jan 2013, but was
eventually pushed back to Mar 2013. This was because the
differences between President Obama and congressional Republicans
were still to be resolved.
Up to one-third of the workers appointed by the U.S.
Agriculture Department could be laid off as a cost-cutting
measure by the U.S. government.
If that happens, it will lead to a two-week shutdown of plants
owned by meat processing giants like
Tyson Foods Inc.
Sanderson Farms Inc.
). By law, meat processors cannot sell beef, pork, lamb and
poultry meat without the USDA inspection seal.
According to Agriculture Secretary Tom Vilsack, the impact of
the furlough of inspection personnel may amount to 15 days of
lost production costing over $10 billion. However, Vilsack has
assured meat processing giants that they will not have to shut
down the plants very soon. That is on account of the inspectors
being allowed 30 to as many as 120 days, or four months' notice
The move to furlough the nation's federal meat, poultry and
egg products inspectors by the USDA as a measure of sequestration
has been condemned by several organizations. The National Chicken
Council requested the USDA to consider the decision once again as
the shutdown of meat plants will negatively affect schools and
other public institutions that rely on contracted-for meat and
Sanderson Farms apprehends a huge loss during the 15-day
furlough of inspection personnel and consequent shutdown of
plants. The company also said that live chickens would suffer
from higher mortality. The mortality would occur when chickens
gained weight as a result of the company postponing chicken
processing, which would in turn affect supply to grocery chains
Tyson Foods, however, said that it is monitoring the
proceedings regarding the budget cut and that it would stay away
from any speculation in the interim period.
Currently both Tyson Foods and Sanderson Farms carry a Zacks
Rank #1 (Strong Buy).
KROGER CO (KR): Free Stock Analysis Report
SANDERSON FARMS (SAFM): Free Stock Analysis
SUPERVALU INC (SVU): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
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