EXCLUSIVE-U.S. boosts bird flu emergency funds as Hormel cuts jobs

* Hormel unit temporarily cuts 233 jobs

* Outbreak confined to birds, no human cases yet (Adds Hormel unit staff cuts, updates outbreak numbers, adds details of USDA funding)

By P.J. Huffstutter and Tom Polansek

CHICAGO, May 5 (Reuters) - The U.S. government approved the use of an additional $330 million in emergency funds to help contain the worst avian influenza outbreak in U.S. history, as infected bird cases soared and hundreds of Minnesota poultry workers learned they would lose their jobs.

The funds became available after the federal Office of Management and Budget granted U.S. Agriculture Secretary Tom Vilsack's request for additional emergency funds, USDA sources confirmed to Reuters on Tuesday.

Virulent H5 avian influenza strains have spread to 14 states in five months and affected about 24 million birds so far, mostly egg-laying hens and turkeys, according to USDA.

That tally is expected to grow, as U.S. authorities confirm pending cases. The outbreak, which is also affecting two Canadian provinces, shows little sign of slowing.

In Minnesota, the largest producer of U.S. turkeys, state officials said almost 5.5 million turkeys and egg-laying chickens have either died from the flu virus or are set to be killed in an effort to contain the outbreak.

In Iowa, the top U.S. egg producer, state agriculture officials said an estimated 20 million chickens and turkeys have been affected there.

The outbreak's economic ripple effects are being felt across numerous sectors, from food companies seeing a squeeze on egg supplies, to meat processors flooded with excess poultry products amid export market bans.

Also on Tuesday, Hormel Foods Corp unit Jennie-O Turkey Store said it will temporarily lay off 233 workers at a Minnesota plant, effective May 26, because the flu has reduced turkey supplies. It was the first known instance of a company linking job cuts to bird flu. There is no date set for the workers to return.

"Our intent is to have everyone come back to work when bird numbers return to normal levels," Randy Vergin, manager of the Jennie-O Turkey Store plant in Faribault, Minnesota, said in a statement.

The outbreak has also raised concerns that turkey supplies may be tight for the Thanksgiving and holiday season.

The strains pose a low risk to human health, experts say, and no human infections have been identified so far.

ECONOMIC SQUEEZE

While scientists believe wild birds are spreading the disease, researchers do not know exactly how the highly pathogenic H5 viruses have penetrated inside barns.

The outbreak is also hurting scores of U.S. poultry farmers, who are expected to submit indemnity claims to the U.S. Agriculture Department in the wake of their birds becoming infected and flocks culled.

"Farmers across Minnesota are in a financial and emotional whirlwind," said Minnesota state Rep. Jeanne Poppe, a Democrat. "Turkey processing plants are being forced to idle production lines because of the drastic decline in turkey supplies and workers are being laid off."

Initially, USDA had set aside $84.5 million to compensate farmers and for other outbreak-related costs. The agency can use additional funds to pay for the expected increase in indemnity claims filed by poultry farmers.

The funds are also approved for such uses as sanitation of equipment and the culling of infected flocks.

"We are confident that support for producers will continue to be adequately funded as needed," according to a statement from USDA's Animal and Plant Health Inspection Service. (Additional reporting by Karl Plume and Karen Pierog in Chicago; Editing by Matthew Lewis)