The Market's Fine Print

The Timely Question of Walls

John Harrington
By  John Harrington , DTN Livestock Analyst
The longer it takes for President Trump and Congress to find a path forward on the border wall and ending the partial government shutdown, the greater the threat to meat demand. (DTN illustration by Nick Scalise)

"Good fences make good neighbors."

Hmm? Now where have I heard that one before?

Mrs. Larson's ninth grade English class? Team Trump's popularly soft focus on homeland security? Bitter notes from the Johnson County War's last necktie party?

On the other hand, what about: "Something there is that doesn't love a wall, That wants it down."

What wheelhouse keeps pounding this drumbeat through my small cavern of a brain, one never known for brilliant acoustics? Does it still well from my 4-H memorization for the 1970 State Fair? Perhaps from the back cover of Nancy Pelosi's unpublished book of tall tales and wishful thinking? Lazy Jake's workman's comp claim?

With the deepest apologies to the great American poet Robert Frost, these famous verses have been pretty much commercially channeled by market watchers and shameless politicians since late 2018. Granted, the controversial topics of Mexico, immigration and "the wall" have been hotly framed in both prose and poetry since the early primaries of 2016.

Yet we all know that wall rhetoric has significantly escalated in recent weeks thanks to one of the strangest combinations of statecraft and wheeler-dealing seen in the 242-year history of the republic. Of course, I'm referring to the ongoing partial government shutdown, the craziest of wildcards that not even Bill Hickok would dare to palm into the deck.

Indeed, I would suggest that meat producers simply keep all the wall war-talk strapped in the backseat (at least for now) and concentrate instead on the possibly dire demand consequences that threaten to flow from the spitting contest currently juicing the government plug-pull.

In short, I couldn't care less about your assessment about caravans that seem to grow and dwindle faster than you can say "Make America walled again." Nor do I think you should lose much sleep about the commandeering M-13 proxy at the local co-op. Finally, don't waste time speculating that more durable trowels and better tuck-pointers at the Great Wall of China might have somehow set the modern stage for more sustainable business involving U.S. pork and soybeans.

While serious negotiations about immigration reform and safeguards must eventually be hammered out at the highest levels of government, it is absolutely critical for farm and ranch captains to insist on a rational priority of problem-solving, one that does not impossibly compound the resolution of this centerpiece by sinking the agricultural economy into a deeper and deeper morass.

Simply put, the coupling of wall-building with government layoffs is far worse at this time in terms of meat demand and revenue than placing a rickety wagon before a sway-backed mare. Rather, the counterproductive strategy comes closer in design to rehabilitating ISIS through Sunday school lessons and a really good Wall Street broker.

The more and longer federal workers are instructed to cool their bureaucratic heels without pay, the greater family budgets are stressed and the faster the power of consumer spending dries up. It goes without saying that when the average household strapped for cash is forced to perform serious triage upon the weekly food budget, the priciest items in the red meat case typically stick out as prime candidates for sacrifice. The same rule of more frugal eating applies to restaurant attendance, both in terms of frequency and precise ordering.

Barring a sudden parting of the dark give-and-take clouds between the White House and Congress over the next 24 hours, approximately 800,000 furloughed federal employees will not be troubled with paychecks or bank deposits on Friday. To be sure, this number represents a very small percentage of the total U.S. workforce (i.e., roughly a half percent). Yet the proportionate spending power of these largely white-collar workers is doubtlessly far more formidable.

Still, the possibility of hurtful belt-tightening up and down the Beltway per se strikes me as less threatening to the ag sector's economic health than negative multipliers that could cripple consumer spending across the entire country at an amazing speed. Just recall the cancerous rampage of 2008 when the implosion of consumer spending triggered the foreclosing of houses, cars, credit cards and banks.

We all know that giant, toxic mushrooms can easily sprout from spores once thought to be insignificant.

Another economic calamity that could balloon from a prolonged government shutdown is linked to billions of dollars currently invested by federal contractors. While Congress has often gone back in the wake of past shutdowns and made it right with temporarily inconvenienced furloughed workers vis-a-vis back pay, it has rarely treated independent contractors so kindly, leaving them to hold whatever bags they happened to be saddled with when the smoke cleared. Of course, this reality could also spark its own slide of negative multipliers.

Finally, the intractable government shutdown now on the verge of being the longest in U.S. history could critically undermine short-term meat demand by locking the mailroom door at the Treasury Department, effectively blocking the timely distribution of tax refunds for millions of citizens and businesses (i.e., as many as eight out of 10 taxpayers get refunds in a typical year). While refunds delayed are not necessarily refunds denied, the unfolding awkwardness could constitute budgetary speed bumps capable of disrupting meat spending for months to come.

Does anyone hear another potential whisper of costly ramifications?

Since my primary concern here is the pending danger to meat demand posed by the current inaptitude of those who pretend to govern, I won't mention many other challenging pitfalls that seriously threaten the success of food and meat production. For the moment, never mind that wall mania apparently means that important supply and demand reports will be silenced by politically sanctioned unemployment. For the moment, never mind that vital questions of 2019 livestock feed production, many of which hinge on bailout funds and tariff compensation, could remain mysteriously unanswered far into the start of the growing season thanks to sacked USDA check-writers.

Rather, the purpose immediately at hand is to urge all meat producers, partisans, Republicans, Democrats, talking heads at Fox and MSNBC, border guards, mayors of sanctuary cities, immigration judges, international critics and hosts of late-night television to do whatever they can to dismantle the "win-lose" mentality that may be reluctantly inching President Trump and Congressional leadership closer to economic turmoil with each passing day of mudslinging.

While I'm sure the nasty fallout from the government shutdown stands to vary from section to section, no one in agriculture (and specifically in meat production) dare pretend they don't have a dime in this game. Let all keep their passions about "the wall," border security and immigration reform. These issues are too important to repudiate and demonize just because they are painfully difficult.

But proponents and opponents both need to acknowledge that using the government shutdown as leverage gets us nowhere. At least nowhere that we want to go.

John Harrington can be reached at harringtonsfotm@gmail.com

(AG)

John Harrington