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Financial Best Practices in the Face of Avian Influenza

More than 180 commercial flocks across 20 states have been impacted since the highly pathogenic avian influenza (HPAI) was first reported in the United States in early 2022. Commercial infections are highest in Minnesota, followed by South Dakota. Iowa and Nebraska are the hardest hit when tracking the number of birds affected.

Losses from avian flu are always devastating, said Phillip Figi, an agribusiness lender who works with FCSAmerica’s poultry producers. “To have it happen right when profitability is so good, it’s really a kick in the ankle.”

For many in the poultry industry, profitability is as high as it has ever been and is certainly better than it has been the past six to seven years, Figi said. At the same time, the industry faces rising input costs and cage-free related expenses.

“Right now we’re looking at $8.00 corn and $16.00 soybeans,” said Glen Bouchard, an FCSAmerica lender who also serves the poultry industry. “Input costs are incredibly high. Many of these customers also are either currently going through conversions to cage free or, in the next 18- to 24-months, are going to have a huge cash outlay to convert conventional barns to cage free.”

For those who lose birds to avian flu, this is a triple whammy that likely will influence their choices when it comes to repopulating barns, Bouchard said: “I suspect there’s going to be a significant number of producers who will be faced with very tough decisions.”

Planning Ahead

It’s a good idea to “have a plan in place,” Bouchard said. “Do a role play,” he advised. "If our barns break today, what are we going to do? What’s the first step?”

USDA has a resource center to help producers navigate federal regulations for reporting and containing infection, applying for compensation and more. State poultry associations are also helpful.

USDA’s indemnity program helps cover the costs of destroying birds and eggs, cleaning facilities, composting and sanitizing. “But in no way does that cover the expense that will be recognized,” Bouchard said.

He advises producers to look out and assess the impact an outbreak would have on cash flow.

“Maybe now is the time to be stockpiling cash while you can, in anticipation of that.” 

One of the goals in working with customers is to help them structure their balance sheets to withstand a catastrophic event, Figi said. “We want to make sure they have the strength needed to get through a situation.”

Producers who have worked to bring down costs to manage through low prices in recent years now have among the strongest balance sheets. While being the low-cost producer is always a competitive advantage, in today’s environment it also is important in withstanding a possible outbreak, Figi said.

Support if Disaster Strikes

Even strong operations may need the support of their lender following a disaster. After the 2015 avian flu outbreak, FCSAmerica deferred principal and interest payments for impacted producers looking to free-up cash during the rebuilding process.

In the years that followed, FCSAmerica also loaned extensive amounts of money for new, on-farm biosecurity facilities. “I can personally attest that the level of scrutiny for getting into a modern laying facility is higher than it is to enter an intensive care room at a hospital,” Bouchard said.

But no amount of technology can completely protect against human error. Agriculture is dealing with the same tight labor challenges as other industries, and many of the people working in poultry facilities today didn’t work through the 2015 outbreak. An employee who fails to follow biosecurity protocols puts an entire operation at risk by simply stepping outside during a break. Biosecurity training is now one of the most important defenses against disease, Figi said. 

There is hope that as temperatures are consistently warm and birds finish their spring migration, the risk of avian flu will diminish. However, Figi said, veterinarians are concerned that HPAI could come back this fall, adding risk for those impacted by the current outbreak.

Many operations are focused on moving forward as soon as possible so they don’t lose out on current opportunities for profit, Figi said. “But if a company spends the money to repopulate and then is hit again, that could be catastrophic.”

Communication with the lender is key during these events. “It’s important to help us understand what impact this has on your cash flow,” Bouchard said. “Did it wipe out the entire flock? Or just one small portion of it? How is the timing going to impact the business? Are you going to be receiving indemnity payments?” Bouchard advised reaching out to your lender immediately following an outbreak.

We stand ready to provide support to those whose flocks might be affected by the virus. To learn more about avian flu, follow the links below:

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FCSAmerica serves farmers, ranchers, agribusinesses and rural residents in Iowa, Nebraska, South Dakota and Wyoming. For inquiries outside this geography, use the Farm Credit Association Locator  to contact your local office.