Help! Orange powdery Fungus!!!!

It's not completely wasted. The frame is still good. It's just a pitiful skeleton now.
 
That wasn't fungus, but a mold often called Slime Mold. It isn't harmful to animals..living off dead wood and other organic matter. It is controlled by ensuring that dampness is kept to as low a level as possible. You stated that you touched it and it sent off powder? That was actually the spores so now you have a nice coating of it all around. But like I said...it can't hurt you. Just keep the dampness down to help retard its growth and get a mold killer. Fungus killers won't really do anything to it.
 
We just ripped off the walls inside and out and the plywood I used was from packing crates for shipping. It wasn't made to last. In fact with all the storms that came through here and the wood had been painted, it sucked up water like a sponge.

But you know, none of my 2x4's were affected. Just the "freebie crappy" wood.
 
That's the down side of making a coop out of sub par materials. Recycling is great, second use material is great, being resourceful is awesome... but sometimes when it comes to the value of your time and how long you want your structure to last, it is best to buy some stuff you know is good and will work in your climate. Here in the PNW I used t1-11 plywood siding for my coop because any missed spot that allows water to touch any press board material = certain water damage.

Good luck on your new walls! I used killz primer and two washable semi-gloss top coats of paint for interior and exterior.
 

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