Bird flu crimps Minnesota economy by $310 million, estimate shows

The bird flu that has swept across the Midwest in recent weeks is taking a sharp toll on rural economies, with University of Minnesota researchers estimating losses in the state at $310 million and counting.

An analysis released Monday shows that the outbreak is having a significant impact on the state's $3 billion poultry industry and on several counties and small towns. After farmers themselves, suppliers and trucking companies are getting hurt the most, the U's extension service found in data collected up to the start of last week.

"If the virus affects more farms, as we have seen since May 11, the impact levels will rise," said Brigid Tuck, the analyst who led the study. "If barns stay empty for another cycle of poultry production, these numbers could potentially double."

Bird flu has doomed more than 33 million birds in 15 states, with Iowa and Minnesota the hardest-hit. On Saturday, Rembrandt Enterprises, one of the nation's largest egg producers with farms in Minnesota and Iowa, announced that it would destroy 2 million egg-laying chickens after a barn holding 200,000 hens was infected in Renville County.

The economic impact analysis sticks to Minnesota and focuses on the state's 80 non-metro counties. The study put direct losses in the state — from the deaths of turkeys and egg-laying chickens — at $113 million by the start of last week.

For every $1 million in direct losses, the report said the ripple effect leads to an estimated $1.8 million in overall economic losses, including $450,000 in wages.

"There's an interconnectedness here," said Steve Olson, director of the Minnesota Turkey Growers Association. "There's an impact statewide."

The feed industry will be the hardest-hit related business. For every $1 million in direct losses, nearly $230,000 of poultry feed demand is also lost.

"A dead turkey doesn't eat," said Greg Langmo, a turkey farmer near Litchfield who lost the birds at one of his farms. "Feed mills and their vendors, the farmers who sell them corn and of course the soybean meal plants, will be impacted."

John Nelson at Schlauderaff Implement in Litchfield said corn prices in west central Minnesota have taken a hit relative to prices on the Chicago Board of Trade thanks to avian flu. The price to local end-users — turkey farms, ethanol plants, Cargill — is now 31 cents per bushel below the price in Chicago. That discrepancy can equal about $70 an acre in lost revenue for a farmer.

"That's big money," Nelson said.

In the meantime, sales of agriculture equipment, which have been slowing as grain farmers adjust to lower prices for crops, are being dampened further by bird flu.

"You'll get the grain farmer who's pulled back on his purchases because he's lost that much revenue," Nelson said. "Used equipment is still moving, but not the new equipment."

Researchers noted that insurance and government compensation for producers will alleviate losses for poultry producers, even though the effect on other industries will not be offset.

Each $1 million loss also means an estimated three jobs at farms will be affected. If farmers are able to return to full production within a few months, it's possible these jobs will not be lost.

"We keep people around even though we don't have any work for them," said Kim Gorans, a farmer near Willmar who has lost birds to the flu.

His family also grows crops and owns a feed mill. He said they are composting dead turkeys and cleaning barns.

Large amounts of corn and other feed ingredients slated for turkey and chicken farms will have to find other markets, he said.

"There's a lot of corn that will have to be exported," he said.

Tuck, the lead author of the study, said the model she and her colleagues created will be valuable in assessing losses in the future.

"It's important that we continue to watch how this progresses," she said.

Adam Belz • 612-673-4405; Twitter: @adambelz