How Federal Government Shutdowns Affect Agriculture
Many farmers rely on government programs to keep their operations running.
The government plays a big role in farm income, from providing crop insurance to facilitating USDA programs that pay farmers to take advantage of sustainable practices. The USDA is also a big source of information, and many farmers, economists, and agricultural reporters rely on their data to understand the market.
What happens to farmers when the government shuts down? Which programs are affected, and which continue to run? In this article, we answer those questions and more.
Why Do Federal Government Shutdowns Happen?
A government shutdown occurs when Congress fails to pass appropriations bills, which are responsible for financing the government’s operations for the upcoming fiscal year. These bills are intended to provide funding until the fiscal year’s end on September 30th.
Congress rarely passes appropriations bills on time. In the last 50 years, Congress has only met their deadline four times. In these instances, Congress can pass a continuing resolution (CR), which is a temporary measure that keeps the government funded at the same level.
If appropriations are still not signed into law by the end of the CR deadline, the government will begin to shut down.
Which Departments Are Affected by Federal Government Shutdowns?
The specific departments and agencies affected can vary depending on the nature of the shutdown and which appropriations bills have been passed.
In September 2023, Congress passed a continuing resolution with a deadline of March 1, 2024. Within the CR, it stipulated a two-tiered process. Departments of Agriculture, Energy, Transportation, Military Construction and Housing, and Urban Development would shut down first, on March 2, 2024. If an appropriations bill was still not signed into law by March 9, then the Departments of Commerce, Justice, State, Defense, Homeland Security, Interior, Labor, Education, and Health and Human Services would follow.
Although this shutdown was avoided with the passing of a funding package, it stands as a good example of the number of government agencies that can be affected.
Which Agricultural Programs Are Affected by Federal Government Shutdowns?
To understand what programs will likely be defunded in the event of a shutdown, you must understand the difference between mandatory and discretionary funding.
Mandatory funding is allocated by laws outside of the annual appropriations process. These funds are typically dedicated to entitlement programs, such as crop insurance, commodity support payments, and certain conservation programs.
Discretionary funding is allocated through the annual appropriations process. This funding covers a wide range of programs, including those related to research, infrastructure, and regulatory agencies like the USDA.
Because government shutdowns are caused by delayed appropriations bills, only discretionary programs are affected.
Examples of Discretionary Programs that Could be Impacted by a Government Shutdown
Noninsured Crop Disaster Assistance Program (NAP)
NAP provides financial assistance to farmers who experience crop losses due to natural disasters, such as drought, excessive moisture, or hurricanes.
Farm Service Agency (FSA) Loans
FSA provides various loan programs to farmers, including operating loans, farm ownership loans, and emergency loans.
Conservation Reserve Program (CRP) Payments
CRP pays farmers to convert environmentally sensitive agricultural land into conservation areas. While CRP rental payments are typically funded through mandatory spending, certain components of the program, such as cost-share assistance for implementing conservation practices, may be subject to discretionary funding and could be impacted by a government shutdown.
Agricultural Research Programs
Various agricultural research programs funded by discretionary appropriations, such as those administered by the Agricultural Research Service (ARS) and the National Institute of Food and Agriculture (NIFA), could experience disruptions during a government shutdown. This could affect funding for research grants, extension programs, and agricultural experiments that benefit farmers.
Cooperative Extension Offices
While they are not directly federal employees, many Cooperative Extension programs receive funding from federal sources, such as the USDA’s National Institute of Food and Agriculture (NIFA). A prolonged shutdown or lack of federal funding could impact these programs and the ability of county agents to provide services to farmers and ranchers.
Impact on Crop and Livestock Markets
When the government shuts down, it affects how information about commodities, like crops and livestock, is collected and shared. This can create uncertainty for farmers and traders because they rely on this information to make decisions about buying and selling. With less data available, it’s harder to predict market trends accurately. As a result, commodity prices may become more volatile, meaning they could go up and down more dramatically than usual. This volatility can make it challenging for farmers to plan and manage their businesses effectively.
Taxed Department Resources
Additionally, departments must spend time planning for government shutdowns that may never happen.
“This is the fourth time that we’ve had to spend staff time planning for a shutdown. Interestingly enough, depending upon the timing of the shutdown depends on who gets characterized and in what category in terms of the workforce. It is an extraordinary waste of time,” said Tom Vilsack, the Secretary of Agriculture, of the close call in March 2024.
How Farmers Can Navigate Government Shutdown Threats
To avoid being blindsided by a government shutdown, farmers should stay up to date on the latest farm policy and news, and stay aware of funding deadlines. If a government shutdown is anticipated, review your income sources to understand what could be affected.
If you expect to be heavily impacted by a shutdown, you may also consider a short-term interest-only loan to get access to temporary cash flow until funding is reestablished.
If you’re worried about your farm cash flow, or you have questions about your options, don’t hesitate to contact us. AgAmerica works with farmers every day to help them weather economic downturns and grow more sustainable balance sheets.
