Avian Influenza Poultry Producers Face Big Losses

In Delaware, more than 70,000 chickens have been culled in order to prevent the spread of the disease. Both New Jersey and Pennsylvania have reported very limited infections among a few birds.

Bob Fulwider, principal and executive vice president of the Ray Wuestenberg Agency Inc., based in West Liberty, Iowa, said when it comes to disease there is no livestock coverage available to farmers. Insurers do not extend coverage for disease to livestock simply because it is a risk with high loss ramifications.

Mr. Fulwider, a member of the Independent Insurance Agents & Brokers of America Executive Committee, said Farmers can purchase mortality coverage, but it is limited to individual animals, usually breeding bulls and cows and horses.

The federal government does not offer an insurance plan, said Shirley Pugh, director of public affairs for the Risk Management Agency, a department within the United States Department of Agriculture that handles the federal Crop Insurance Program. She added that there are no proposals on the board at this time.

Don Manley, executive specialty market agricultural business for Westfield Insurance Company, based in Westfield Center, Ohio, said the company, which is a major writer of agriculture business, examined the introduction of avian influenza coverage back in around 2001, but there was no interest in the farm market for the product.

The disease, however, is affecting a $2 billion export market, said Richard Lobb, spokesman for the Washington, D.C.-based National Chicken Council, an industry association.

He said 25 countries have banned chicken imports from either all of the U.S. or Delaware alone. China, the United States' largest importer of chicken, has banned all chicken imports from the U.S., while Russia and Mexico have banned imports from Delaware.

Mr. Lobb explained that poultry farmers do not own the chickens they raise. Corporations, such as Purdue and Tyson, contract the farmers to raise the chickens for them. So the losses from disease, for the most part, are not suffered by the farmers, but the corporations.

In Delaware, the corporations are assuming the first $100,000 in losses. The second tier of loss is assumed by an industry pool, which he estimated at about $2.5 million. There is a third-tier limit of about the same amount assumed by a state pool. From there, however, it is a question as to what compensation may be available.

Unfortunately, he said, the state pool system is not universal throughout the country, meaning some corporations are subject to higher loss exposures and mechanisms for controlling the outbreak of disease are not in place as they are in Delaware.

One of the worse losses was just a few years ago in Virginia, where the industry lost 130 million chickens before an avian flu outbreak was brought under control, Mr. Lobb noted. It was a wake-up call to neighboring states, which Delaware heeded, keeping the outbreak to one flock, so far, he said.