New World Screwworm Case in Texas Rattles Cattle Markets. If Cattle Prices Collapse Further, It May Be the Media’s Fault.

August live cattle (LEQ26) on Thursday rose $3.675 to $241.525 after hitting a nine-week low early on. August feeder cattle (GFQ26) rallied $10.75 to $353.375 after hitting a 5.5-month low early in the session. The cattle futures markets Thursday saw big and technically bullish “outside days” up on their daily bar charts. Cattle traders on that day decided to “buy the fact” on news of a case of New World screwworm (NWS) detected in Texas. On Wednesday cattle traders “sold the rumor” of the parasite spreading north. 

The NWS situation is still fluid, and cattle futures markets may remain volatile. The bullish aspect of the situation is reduced cattle supplies coming from Mexico and now possibly from the far southern U.S. The potentially cattle-price-bearish aspect of NWS is possible negative U.S. consumer psychology toward beef (less demand) that could result from the flesh-eating parasite and the general news media hyping the situation.

USDA Secretary Brooke Rollins on Thursday afternoon said her agency is working to contain NWS after the case was detected in Texas, which could impact the U.S. meat industry and the domestic cattle herd. The agency is implementing quarantines, movement controls, and surveillance in a zone around the detection site to prevent a bigger outbreak, which depends on fencing in the screwworm fly.

The parasite was confirmed on Wednesday in a three-week-old calf in south Texas, marking the first detection in the U.S. in nearly a decade. Specifically, the agency is implementing quarantines, movement controls, and surveillance in a 12-mile zone around the detection site in Zavala County. Rollins said there were no other infested animals on the ranch where the case was confirmed and that there is no evidence of recent movement of animals onto or off the premises. 

“This fly typically moves great distances because humans move animals, not because the fly flies to new areas,” Rollins said on the late-Wednesday call. “This is a really important point. The only way this spreads is through animal movement. It’s not because the fly flies tens of miles or hundreds of miles on its own.” 

The Meat Institute, the industry group representing meatpackers, said in a statement that it will look to the USDA “to brief industry stakeholders and call on them to consider allowing low-risk terminal movements for slaughter to ensure animals continue to be processed.” That includes animals headed straight to slaughter that don’t come from infested zones or are raised indoors, said the institute and as reported by Bloomberg.

Cash Cattle Prices Weaken Late this Week

The USDA at midday on Thursday reported active cash cattle trading, with steers averaging $256.02 and heifers $255.75. Last week’s average cash trading price was $256.86 – down $3.63 from the prior week’s average. The weaker cash trading may limit the upside in cattle futures trading to end the week Friday.

My Bias

We saw the cattle markets sell off Wednesday, as the bears pushed the short side on NWS uncertainty and its potential impact on U.S. consumer beef demand. And on Thursday the cattle futures bulls won out the trading day on the upside as markets rallied on ideas the NWS situation will further constrict cattle supplies coming to market for slaughter. So, which camp will in out in the coming days and weeks? My bias is that cattle futures trading will remain choppy and more volatile in the near term. However, I believe the NWS situation favors the cattle market bears over the intermediate to longer term. 

Much of the media likes to hype matters, knowing that the more they sensationalize things, the more viewers or clicks their stories will get. (Importantly, I am not anti-media because I am the media — a formally trained journalist. I am just pointing out that since my days in journalism school in college in the early 1980s, journalistic values have changed — and not for the better).  A concern in the cattle industry is that U.S. consumers will be spooked by sensationalized news reports describing NWS and its gruesome effects on animals. For example, the lead paragraph in a Bloomberg story Thursday read: “U.S. authorities are accelerating emergency measures after the flesh-eating New World Screwworm parasite was detected in a three-week-old calf in South Texas, the first animal case reported in the country in almost a decade.”

Regarding the bullish NWS aspect of reduced cattle supplies in the U.S. raising prices, such may be the case. However, longer term, historically high beef prices at the meat counter are likely to diminish consumer demand, especially with gasoline prices at the pump well above $4.00 a gallon.

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