U.S. Bird Flu Seen Leaving Grain Market Unscathed as Turkeys Die

Even with bird flu plaguing millions of turkeys and chickens across the U.S., the drop in demand for feed made from grains won’t be significant enough to impact crop prices, according to Allendale Inc.

In the worst case, the disease would spur the loss of about 5 percent of the egg-laying chicken flock and the same proportion of domestic turkeys, said Rich Nelson, the chief strategist Allendale Inc., a broker and consultant in McHenry, Illinois. That would cut demand for corn in feed supplies by 23 million bushels, or less than 1 percent of what will be consumed mostly by poultry, hogs and cattle this year, he said. The decline for use of soybean meal would also be less than 1 percent of feed demand.

Avian influenza has spread to more than 60 commercial poultry farms from Arkansas to Minnesota, the nation’s top turkey producer. While the disease won’t exacerbate declines for grain prices, corn and soybean futures have dropped more than 25 percent in the past year amid bulging inventories.

“From a feed-use standpoint, we can’t see a major impact in prices, not in this year’s big supply story,” Nelson said in a telephone interview.

With flocks of more than 7.8 million birds ravaged by the disease this year, U.S. farms are stepping up clean-up efforts and Minnesota’s Governor Mark Dayton has declared a state of emergency. At stake is the roughly $44 billion a year made from poultry and eggs produced in the U.S., the latest government figures show. The outbreak, the worst in three decades, has prompted poultry buyers from Europe to Asia to place restrictions on American shipments.

‘Unchecked Spread’

Poultry production accounts for about 34 percent of U.S. feed-grain use, and about 57 percent for rations made from soybean meal and other high-protein meal, according to Morgan Stanley. Bird deaths from the flu outbreak so far account for less than 1 percent of annual chicken slaughter, and about 1.4 percent for turkeys, the bank estimates.

“Even in the worst-case scenario of an unchecked spread of the disease, we would see such an event as more bearish for soybeans than for corn,” Morgan Stanley analysts including Bennett Meier wrote in a report dated April 27.

Bird flu has been found primarily in commercial turkey flocks, particularly in Minnesota, where abundant waterways attract wild geese and ducks, suspected of carrying the disease. Last week, the U.S. government also reported the disease in millions of egg-producing chickens in Iowa, the nation’s top producer.

“It’s a poultry farmer’s worst nightmare and an economic nightmare for states that are the hardest hit,” Jacquie Voeks, a senior market-adviser at Stewart-Peterson Group in Mahomet, Illinois, said in a telephone interview. “But if it stops spreading now, it’ll hardly be a blip on the radar of grain.”

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