SIOUX FALLS, S.D. (AP) — An eastern South Dakota farm with 1.3 million egg-laying chickens is the first in the chicken-production business in the state to be infected with a deadly flu virus despite efforts to prevent it, state and farm officials said Thursday. 
 
 In this July 9, 2014 photo released by Dakota Layers, batches of eggs move through the processing area of Dakota Layers in Flandreau, S.D. The farm is the first in the chicken-production business in the... (Associated Press) 
 
 This Oct. 5, 2014, aerial photo released by Dakota Layers, shows the Dakota Layers Egg Laying Facility in Flandreau, S.D. The farm is the first in the chicken-production business in the state to be infected... (Associated Press) 
 
 In this July 9, 2014 photo released by Dakota Layers, a batch of eggs is sprayed with water after entering the processing area of Dakota Layers in Flandreau, S.D. The farm is the first in the chicken-production... (Associated Press) 
 
 Flandreau-based Dakota Layers, which accounts for nearly half of the state's almost 2.7 million egg-laying chickens, reached out to the state veterinarian Wednesday after it noticed an unusual number of dead birds in one of its nine barns. 
 
 A South Dakota State University lab confirmed the presence of the highly pathogenic H5 avian influenza virus. Officials hadn't confirmed yet Thursday whether it was the H5N2 strain. If so, then the virus will have led to the deaths of more than 33 million chickens and turkeys in the Midwest, primarily at farms in neighboring Minnesota and Iowa. 
 
 South Dakota State Veterinarian Dustin Oedekoven said crews would begin euthanizing the chickens after they determined how best to handle the largest outbreak the state has seen thus far. 
 
 Dakota Layers' Chief Executive Officer Scott Ramsdell said in a statement Thursday that Dakota Layers had taken "extensive biosecurity measures" over the last two months to prevent an outbreak in their barns. 
 
 "Unfortunately, as many poultry farms are discovering, even our extraordinary measures proved ineffective in preventing the spread of avian influenza into one of our barns," Ramsdell said. 
 
 Dakota Layers produces more than 90,000 dozens of eggs daily and ships about 70 percent of its eggs to California. Agriculture officials have stressed there is no danger to the supply and very low risk to humans. 
 
 Oedekoven said it was disappointing to see a large-scale operation lose it birds after taking all the appropriate precautions. 
 
 "It's a big loss, it's a big hit," he said. 
 
 Officials from the U.S. Department of Agriculture were on site Thursday to evaluate the operation and work with the state in figuring out how to proceed. Bird flu has already been found at eight turkey farms in South Dakota — affecting almost 500,000 birds — but none of this magnitude. 
 
 The hens would likely be humanely euthanized with carbon dioxide gas, Oedekoven said, but the state hasn't yet decided how to dispose of the carcasses. Officials have primarily been burying turkey carcasses in addition to composting them. 
 
 "It's not pleasant work, but we've had great cooperation with our industry and we hope they can make it through this," Oedekoven said. "We'll proceed as best we can and continue to hope for the end of this plague." ||||| Joe Greco, who’s been churning out cookies and cakes for 27 years, usually uses about 600 pounds of liquid eggs a week at his bakery near Chicago. Now, his freezer has seven times that amount because Greco worries that record prices are about to go even higher. 
 
 The cost of breaker eggs -- those cracked and sold in liquid form for use by wholesale bakers and restaurants such as McDonald’s Corp. -- have more than doubled in the past three weeks. The culprit behind the surge: the worst-ever American outbreak of the bird flu virus. 
 
 More than 33.5 million chickens, turkeys and other birds have been affected. Iowa, the top U.S. egg producer, was hardest hit, losing 40 percent of its laying hens. The disease prompted the government to forecast the first annual drop in egg production since 2008. Greco is concerned his 4,200-pound (1,900-kilogram) stash of liquid eggs won’t protect him from higher costs, and that he’ll have to start buying eggs still in shells to crack by hand. 
 
 “As soon as I heard about the bird flu, I knew this was going to happen,” said Greco, 47, who owns Palermo Bakery in Norridge, Illinois, near Chicago’s O’Hare Airport. He’s been racing to buy extra supplies over the past month and saw prices for the pails of liquid eggs he buys jump 28 percent last week. “After the Fourth of July, there might be another nightmare, so I’m still shopping around to see if there are better prices.” 
 
 Highly pathogenic avian influenza spread rapidly through parts of the Midwest in the past two months, and Iowa lost about 23 million hens. Post Holdings Inc. has warned that bird flu will hurt fiscal 2015 earnings at its food-service unit, while countries in the Middle East and Asia have placed restrictions on shipments of U.S. poultry. 
 
 Falling Output 
 
 The U.S. Department of Agriculture on Tuesday said that domestic egg production will drop this year, reversing an April forecast for an increase. Bird flu will also limit turkey supplies, though they’re still expected to climb from 2014. Total annual poultry and egg output is valued at about $48 billion. 
 
 Prices for wholesale breaker-eggs reached $1.23 a dozen on Wednesday, the highest ever, according to commodity researcher Urner Barry. The highly concentrated industry in Iowa increases the chances of greater supply impact, said David Swenson, a regional economist at Iowa State University in Ames. About 1 percent of the state’s farms account for 97 percent of egg capacity, he estimated. 
 
 A third of all eggs in the U.S. are broken for the liquid products, and about 23 percent of that supply has been destroyed by bird flu, according to Urner Barry, which has been tracking the industry since 1858. The liquid eggs are a staple in industrial food production for everything from imitation crab meat to ice cream. 
 
 ‘Industrial Users’ 
 
 “It’s more complicated than just the grocery store and the dairy counter,” Iowa State’s Swenson said in a telephone interview. Higher costs will “find their way more widely downstream into large industrial users,” he said. 
 
 Governors in Minnesota, Nebraska, Wisconsin and Iowa have made resources available to stem the spread of the disease after declaring states of emergency, and the USDA has authorized $330 million for bird-flu assistance to farmers. Warmer weather is also expected to slow the outbreak. 
 
 McDonald’s, which uses liquid eggs for its sausage burrito and scrambled eggs, has contingency plans and doesn’t anticipate an impact on its ability to supply restaurants or serve customers, spokeswoman Lisa McComb said in a May 13 e-mail. 
 
 Center Fresh 
 
 Farms housing about 5.5 million hens owned by Sioux Center, Iowa-based Center Fresh Group reported cases of the disease last month, prompting the company to increase measures to prevent more infections. They’re now washing the tires and undercarriages of all vehicles that come onto their farms. 
 
 “Our entire industry is engaged at this point in this problem and how to get through it,” J.T. Dean, Center Fresh’s chief operating officer, said in a telephone interview. “We’re going to continue to maintain every biosecurity step that we can on our unaffected facilities, and I suspect we’ll maintain that posture indefinitely.” 
 
 Clean-Up Time 
 
 The most important business stories of the day. Get Bloomberg's daily newsletter. More infected flocks will spur even higher costs, with egg prices expected to climb about 1.6 percent for every 1 million lost hens, said Dermot Hayes, an agricultural economist at Iowa State University. The gains can also stick around longer than the disease because of lengthy clean-up procedures and the time it takes for a chick to grow into a laying hen, according to Tom Elam, the president of agricultural-consulting firm FarmEcon in Carmel, Indiana. 
 
 With food makers rushing for supplies, more are turning to shell eggs sold in cartons when they’re unable to find the liquid product. The shelled substitutes fetched $1.55 a dozen on Wednesday, higher than the five-year average for the month of May at $1.08. Chicago baker Greco estimates his costs for liquid eggs could go up another 25 percent by the summer. 
 
 “We’re starting to see some shortages, because for some of the companies that have lost a large number of these birds, there’s no fall-back,” Rick Brown, a senior vice president at Bayville, New Jersey-based Urner Barry, said in a telephone interview. “You can’t just go and say, ‘Oh, I need 2 million eggs today, where can I get them?’ We’re just not able to replace them that easily.”
– The worst outbreak of bird flu in US history is leaving farmers with huge piles of dead chickens and turkeys to get rid of—and leaving consumers with less money in their pockets. It's not just cartons of eggs that have gone up in price with the deaths of millions of hens, the New York Times reports, but the liquid eggs used in dozens of products like mayonnaise and ice cream. There are now 15 states with confirmed cases of avian flu, and Iowa, which supplies a fifth of the country's eggs, has been especially hard-hit, with more than 40% of its egg-laying chickens gone, the Times reports. It takes time to build new flocks of laying chickens, and analysts warn that prices are expected to keep climbing, especially for liquid eggs. "We're starting to see some shortages, because for some of the companies that have lost a large number of these birds, there's no fallback," an exec at commodity analyst Urner Barry tells Bloomberg. "You can't just go and say, 'Oh, I need 2 million eggs today, where can I get them?' We're just not able to replace them that easily." In a worrying sign, a major South Dakota farm that had taken extensive precautions confirmed cases of avian flu this week and all of its 1.3 million hens will be euthanized, the AP reports. "As many poultry farms are discovering, even our extraordinary measures proved ineffective in preventing the spread of avian influenza into one of our barns," Dakota Layers said in a statement. (An egg producer in Iowa had to kill 5.3 million chickens last month.)