Jennie-O to cut production at Faribault plant, idling 233 workers

Already a scourge for the state's poultry growers, the bird flu has begun to claim Minnesota meat plant jobs, idling 233 workers at a Jennie-O plant in Faribault.

The temporary cuts are the first publicly announced layoffs connected with the avian flu, which has wiped out 5.5 million birds, including almost 1.6 million chickens, and struck 82 poultry farms in Minnesota.

The U.S. Department of Agriculture confirmed Tuesday that it will be able to deploy $330 million in newly released emergency funds to battle the bird flu, which food industry analysts say is already widespread enough to drive up turkey and egg prices in coming months.

Nationally, the USDA said the flu has claimed at least 24 million birds, making it the largest avian flu outbreak in the United States.

Jennie-O, a division of Austin-based Hormel Foods, has been hit hard since the bird flu surfaced in Minnesota two months ago. Jennie-O is the nation's second largest turkey processor, relying on Minnesota and Wisconsin for its birds.

The company said in a statement it will move to a single processing shift in Faribault for the "foreseeable future," effective May 26.

"This is a temporary layoff, and our intent is to have everyone come back to work when bird numbers return to normal levels," Randy L. Vergin, the Faribault plant manager, said in the statement. "We do not have an anticipated return to work date at this time."

The Faribault plant employs about 650 and usually operates two shifts. Jennie-O slaughter plants in Willmar and Melrose, Minn., and Barron, Wis., are not affected by the layoffs.

Hormel declined to make an executive available for comment. However, the company's CEO, Jeffrey Ettinger, announced two weeks ago that Jennie-O's supply chain is "facing significant challenges" and that the company's earnings are under pressure.

Minnesota is the nation's largest supplier of turkeys, with annual production of 46 million birds. Of the 78 commercial turkey farms stricken by flu in Minnesota, more than half appear to be Jennie-O suppliers.

A Jennie-O Web page lists 41 Minnesota suppliers, including 20 farms directly owned by the company. The rest are "independent/contract" growers. With contract growers, Jennie-O supplies the birds and the feed, while the grower provides the barn and the labor.

Six turkey farms owned by Jennie-O in western Wisconsin have also been hit by the flu, most of them in Barron County.

While highly pathogenic bird flu has hit more than a dozen states, it has by far taken its greatest toll in Minnesota and Iowa.

Poultry killed directly by the flu — the minority of birds that have perished — are direct losses to the grower. But USDA policy calls for all birds on an afflicted farm — even if just one of a dozen barns is hit — to be killed as a precaution. The USDA pays growers an indemnity for those birds.

The extra allotments by the Office of Management and Budget to the USDA can help pay those indemnity claims, Reuters reported. The agency had originally set aside about $84 million for the bird flu.

Two more Minnesota turkey farms have tested positive for the lethal bird flu, the Minnesota Animal Health Board disclosed Tuesday. About 8 percent of Minnesota's annual turkey production of 46 million birds has been erased so far by the virus.

Minnesota is the nation's largest turkey producer and Iowa — with bird casualties of over 15 million — is the country's biggest egg producer. Though the percent of U.S. egg and turkey supplies affected by the flu is relatively low, the amount of birds lost is enough to put upward pressure on prices.

"There will be some some impact on prices, and my guess is that we will see more volatility in egg prices," said Michael Boland, director of the University of Minnesota's food industry center.

The bird flu's destruction could ratchet up Thanksgiving turkey prices, but a holiday bird shortage isn't yet at hand.

"I don' t think you will have a situation where people won't have a Thanksgiving turkey — it's not that dire," said Len Steiner, a food industry consultant who co-writes the Daily Livestock Report for the Chicago Mercantile Exchange. However, "the really cheap stuff is not going to be available. Turkeys are going to be more expensive."

Still, Steve Olson, executive director of the Minnesota Turkey Growers Association, points out that as bad as the virus has been on turkey farms in Minnesota and throughout the Upper Midwest, the nation overall produces about 240 million birds per year. That means the bird flu toll is roughly 2 percent of national production.

Thanksgiving turkeys comprise about 30 percent of the U.S. turkey industry's production, including in Minnesota. He said the supply hit for the holiday should be minimal. "I don't expect it to have a big impact, price-wise," he added.

Gov. Mark Dayton spoke by phone Tuesday with Glenn Leitch, president of Jennie-O, about the layoffs and the bird flu's impact on the state's turkey supply. According to a statement from Dayton's office, "Mr. Leitch and the governor agreed that this is a very serious situation."

Meanwhile, Rep. Ron Erhardt, DFL-Edina, apologized Tuesday for delivering a meandering floor speech in which he donned a lab coat and stethoscope while alleging that avian flu can be transferred to humans who eat the meat of infected birds.

Erhardt's comments, which drew immediate criticism from his House colleagues, came shortly after more than 600 turkey burgers were served on the Capitol lawn in support of the state's turkey industry. The House on Monday approved an additional $6 million for the state's response efforts, including bolstering unemployment for affected workers.

In a statement, Erhardt said he since has met with Minnesota Department of Health officials and better understands the issue.

"I am confident in their work, and assessment that consuming turkey is safe for Minnesotans," he said. "I apologize for making light of this serious issue, and I support immediate passage of legislation that will adequately fund a response to the avian flu crisis."

Star Tribune reporter Abby Simons contributed to this report.

Mike Hughlett • 612-673-7003