Avian Flu Leaves Economic Upheaval in Its Wake

by Erin Beck

July 29, 2015

This year the ag industry has been rattled by one of the worst outbreaks of avian influenza in history.

With a notorious track record for its ability to wipe out a flock in 48 hours, the avian flu has cost poultry production, egg production and related businesses more than $1 billion.

Over 47 million birds have been affected in 222 confirmed cases across 15 states, and the USDA projects the outbreak will level off closer to 50 million birds by the end of the summer.

In the face of a national epidemic sweeping through the poultry industry, what are the consequences we’re seeing, and what can we anticipate within the upcoming months?

On the Industry Side

Minnesota and Iowa are carrying the brunt of the outbreak, with Minnesota as the top turkey producing state and Iowa leading table egg production. While the avian flu hasn’t hit the broiler population yet, there’s growing concern about what fall will bring and how that will affect the spread of the virus.

Although the warmer weather and long summer days have slowed down the pace of the epidemic, cooler temps and the arrival of migrating birds, the probable source of the avian flu, could prompt the virus to reemerge in the fall.

Even if the outbreak has run its course, it could be at least two more years before flocks fully recover, according to industry experts.

The ag industry is facing several economic implications, from veterinary services to processing and packing to transportation to retail sales. The USDA estimates a decline in egg production by about 341 million dozen eggs, a 4 percent decrease from last year.

In the feed sector, the one bushel per bird estimate of corn could result in over 50 million bushels of corn in surplus, and depending on the repopulation rate of poultry flocks, the amount of unused corn for feed could push closer to 100 million bushels.

This means cheaper feed costs for beef and swine as both corn and soybean meal supplies increase while feed consumption plummets in the poultry sector. Corn and soybean prices have also felt downward pressure due to the unexpected supply of grain on the market.

On the Consumer Side

Consumers are already feeling the heat of rising egg prices. In the Midwest, egg prices have rocketed from an average of $1.43/dozen to a peak of $2.62/dozen before slowly tapering off.

While egg prices have escalated, the price of chicken has taken the seesaw ride down. Several countries have set restrictions on poultry imports in response to the U.S. bird flu outbreak. Lower chicken exports mean a higher supply of domestic chicken, which has bumped the price of chicken down for consumers.

Grocery stores haven’t exhibited an egg shortage yet, but some restaurant chains have responded to rising egg prices by cutting down their breakfast hours and limiting the time when eggs are served.

While extra measures are being implemented to contain the epidemic and prevent the spread of the virus, the timeline is uncertain on just how soon the poultry industry will recover.

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