Few safety nets for poultry producers hit by bird flu

Farm Forum

When a flock of turkeys or chickens is destroyed because of bird flu, the financial fallout can range from a relatively moderate setback to devastation for the producer.

And the financial fallout from the disease is radiating out to businesses that serve the industry.

The disease already has had a big impact on the trucking industry.

Clay Merches, vice president at J&R Schugel in New Ulm, Minn., one of the biggest trucking firms in the state, said a slowdown in business hit May 1 and is lowering the prices trucking firms can charge to haul all manner of freight.

“We do business with several of those chicken providers and we’re shipping fewer and fewer loads.”

He said that means there are more trucks sitting idle at all trucking firms and they are all competing for other types of loads, which drives down freight prices overall. “The demand is not there and the competition (for loads) is high,” Merches said.

No insurance for producers

For the producers of poultry, the personal impact of the losses depends on whether they own the birds themselves or are contractors for large corporations.

For the half of Minnesota producers who own their own birds — often family-owned poultry operations — the financial setback from bird flu could be the demise of their business. For the other half of producers who are simply paid to manage and raise a flock with all of the input costs borne by a large turkey, chicken or egg-processing corporation, the financial fallout is more minimal — mostly a matter of employees being let go for a few months and some reduction in income.

Whatever the financial losses, they can’t be recouped through insurance policies.

Pauline Van Nurden, a University of Minnesota Extension educator at Morris, said neither the Farm Bill nor private insurance covers losses for birds that die of disease.

“With private insurance you have to buy a special rider for communicable diseases (loss), and it’s very expensive and most insurance companies don’t even offer it,” she said.

Kent Thiesse, vice president of MinnStar Bank in Lake Crystal, Minn., and an ag specialist, said private insurance for any livestock producer generally only covers animal deaths from fires or storms — not from disease.

Thiesse said the USDA loss indemnity program does provide limited compensation for producers. “That covers the birds that are euthanized, but it doesn’t cover birds that already died of the flu.” (Once the flu is detected in a barn, the entire flock is killed.)

The program pays for the cost of the bird plus the cost of raising it to whatever size it was when euthanized. It also pays a part of the cost of destroying the flock and cleanup of the barns.

Operations hit by the flu are also going to be out of business for three to six months — the time needed to ensure the disease is no longer present and the barns are disinfected.

“It will affect about half the production for a farm for the year. Most are usually raising three flocks a year,” Van Nurden said.

Support businesses hit

Thiesse said that besides the losses to the owner of the birds — be it a large corporation that pays someone to raise the birds or or a producer who buys and raises the birds before selling them — the financial damages spread outward.

“You have the firms that do the trucking and sell and deliver the feed and the workers on farms who can be out of work for months. When you have these bigger units, they affect a lot of people’s livelihoods.”

Schugel has 600 trucks and Merches estimates the poultry-related business accounts for 5 or 6 percent of the company’s business. He said its poultry-related business is probably down about 80 percent.

He said drivers are sitting idle longer than usual and making longer “deadhead” trips — trips in which a truck travels empty to pick up a load.

He said the firm delivers everything from liquid and whole eggs to frozen chicken and fresh chicken for various customers. He said how long and deep the impact will be is uncertain.

“The providers are saying they’re doing everything they can to improve the situation. They’re working hard to get business back,” he said. “We have a lot of great relationships with these customers and they’ve really been impacted.”

The bird flu also has begun to hit employees of large poultry-processing plants. Jenni-O laid off hundreds recently at its Faribault, Minn., plant, saying the H5N2 virus has reduced the number of turkeys available, so the company will move to a single processing shift.

Help on the way?

Van Nurden and Thiesse said there are discussions in the USDA and by state officials to get some kind of aid to those affected, but so far little is certain. “USDA could issue some emergency loan money,” Thiesse said. “But low-interest loans don’t necessarily solve the problem if you don’t have any income coming in for a few months. It still has to be paid back.”

Van Nurden said Extension, the Minnesota Farmer Assistance Network and faculty at the Minnesota State Colleges and Universities’ Farm Business Management Program also will be assisting producers as they can with financial management advice and finding sources of low-interest loans or other assistance.

The recently approved Farm Bill may provide more protection for poultry producers in the future.

As part of the bill, Congress ordered a study of whether a federal program should be launched that would insure poultry producers for flock losses in the case of a disaster, whether it would be a disease outbreak, weather-related disaster or a financial disaster, such as a poultry processor bankruptcy.

That would be similar to the kinds of protections crop farmers have always enjoyed.

The Associated Press said the amendment including the poultry insurance study was championed by Sens. Chris Coons, D-Del., and Saxby Chambliss, R-Ga. Both Coons and Chambliss are members of the Senate Chicken Caucus.

“Many other segments of agriculture benefit from crop insurance,” Coons said. “Poultry’s something where there is no such product available. There’s no federal role in providing for that … We’re trying to encourage young folks to get into this segment. We want to help them manage risk in a responsible way.”

The amendment doesn’t include any estimate of what a poultry insurance program might cost. The federal crop insurance program cost about $6 billion in federal funds in the most recent fiscal year, according to U.S. Department of Agriculture data, or 3.8 percent of the USDA’s annual budget.