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Common Ground
Farm Credit Services of America Blog

Round Two of Avian Influenza?

by FCSAmerica Staff Reports | Jan 18, 2016

Poultry and egg producers face a possible new threat: Federal officials confirmed the country’s first case of a new strain of avian influenza, H7N8, on January 8 on an Indiana turkey farm. It was quickly followed by nine additional cases, but federal authorities are hopeful that they have acted quickly enough to avoid the widespread devastation seen last year with H5N1.

Producers struck last year are still in recovery and economic impacts spread well beyond their farms.

There is no good time for a disaster to hit. But it’s especially devastating when you are one signed document from an investment to boost your efficiency and expand your operation. Just ask Scott Ramsdell, president of the family-operated Dakota Layers in Flandreau, S.D.

One day before Scott was to complete paperwork with Jeff Coit, vice president of our agribusiness lending, the deadly avian virus H5N1 rampaged through his laying hen houses.

“We put our plans on hold and focused on developing a clean zone,” Scott recalled.

This was no small job with 1.3 million hens and possibly contaminated supplies to dispose of following the May 13, 2015, outbreak.

“We used employees for as much of the work as possible so we could keep them employed as long as possible. Once everything was removed, we devoted ourselves to cleaning all our buildings.”

To ensure the company qualified for disaster aid, Dakota Layers diligently documented all losses, as well as its disposal and cleanup actions.  Even so, the company is waiting for some of its government aid to arrive.

“When you take someone’s business away for a year, it’s very hard to survive,” Scott said.

Russ Winterhof couldn’t agree more. He felt the pain of H5N1 when it hit his custom feeding turkey operation in Aurelia, Iowa, on April 30, 2015. His operation also qualified for government disaster aid.

But Russ received none of the aid; all payments went to the company that owned the birds. Russ was forced to lay off his employees and, to survive, work on USDA cleanup crews while the virus wreaked havoc in the Midwest.

While both operations began repopulation this fall, they still face challenges. With funding from Farm Credit Services of America (FCSAmerica) and the state of South Dakota, Dakota Layers moved ahead with building a barn to produce its own pullets to supplement those purchased from suppliers. If all goes as planned, it will be at least September before the operation is back to its full 90,000 dozen eggs/day capacity.

While losses due to the virus resulted in historic profits for fortunate producers who escaped the scourge, Scott says Dakota Layers not only missed “the upswing in prices, but based on history, it’s likely the market will soon be flooded with excess supply.”

Fortunately, the funding from FCSAmerica and the state will “allow us to preserve our capital reserves to help us through the coming down cycle,” he said.

Economic Ripples

Producers aren’t the only ones who suffered due to H5N1. Using Dakota Layers as an example, about 60 employees lost wages and a large portion of the 1 million bushels of corn and 10,000 tons of soybean meal normally purchased in a year from local sources wasn’t needed. Pullet purchases also went up in a puff of smoke virtually overnight, transport demand shrank and the lost income trickled further to local shops and restaurants.

Nationally, between December 19, 2014, and July 17, 2015, some 219 detections were reported and almost 50 million birds died: 101 detections were in Minnesota and 75 in Iowa, the top two states by far.

Forty percent of Minnesota’s pre-H5N1 inventory - more than 9 million birds - was lost. Direct poultry and related business losses totaled almost $310 million, when both lost birds and future lost production were included. Brigid Tuck, a Minnesota Extension analyst, calculated 2,500 jobs were affected in some way and lost wages, salaries and benefits totaled almost $172 million. In terms of jobs affected, wholesale trade and transportation impacts actually exceeded those of producers.

A study commissioned by the Iowa Farm Bureau Federation estimates the more than 30 million hens and 1.5 million turkeys or 52 percent of the pre-outbreak inventory were lost in the state, resulting in an economic hit of about $1.2 billion. Lost wages totaled about $427 million due to 8,444 jobs lost; taxes were reduced by about $145 million in the state.

Biosecurity is paramount

The main government and industry response to the disaster was to ramp up biosecurity measures. Jeff Coit, our poultry specialist, is well versed in the recommended practices and has helped fund many adjustments. FCSAmerica works with 10 of the largest egg producers and seven of the largest turkey producers in the country, accounting for 23 percent of egg layers nationally.

“Outside of buildings, which have to be emptied, cleaned, disinfected and tested, potential trouble zones range from employee interaction and movement to trucks entering and leaving with feed and other supplies, manure and product,” Jeff noted. “Even dust from gravel can carry the virus.”

The Dakota Layers operation includes both production houses and a processing business, which used to handle eggs from outside purveyors. While employees have always showered in and out of the buildings, security is far more rigorous now.  Employees disinfect the outside of all buildings daily in case a bird flying over drops a feather carrying the virus. Dakota Layers also has installed a guard at the gate to the business to triage arriving vehicles.

“We have three zones requiring different levels of disinfecting,” Scott explained.

Eventually, Dakota Layers likely will put in more blacktop. “I can’t yet begin to guess our increased cost of production due to stepping up security measures,” Scott said.

Biosecurity measures at the Winterhof operation have intensified as well. “We’re using the so-called Danish entry system, with double-sided curtained entrances, keeping outside clothes outside and inside clothes inside,” Russ said. “We’ve switched from plastic boots to rubber and make sure they are changed between buildings. It’s hard to get super confident about it, though.”

For more on the avian flu and biosecurity, visit http://1.usa.gov/1ZI4gW5. Resource links also are available through our previous blog on biosecurity plans: http://bit.ly/1S0GDlB.

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