For weeks, cattle markets had been bracing for the inevitable. As New World screwworm moved closer to the U.S. border, rumors swirled and anxiety built across the cattle industry. So when confirmation came Wednesday night that New World screwworm had been detected in the United States, many expected another sharp selloff in cattle futures.
Instead, the market rallied Thursday.
The reaction may seem counterintuitive, but according to Abby Greiman, livestock market advisor with Ever.Ag, much of the bad news had already been priced into the market.
“We’ve been kind of on a downward slide,” Greiman says. “There had been a little bit of technical weakness, some concern about cutout prices and not seeing a seasonal rally yet. We had a few days in a row of cattle prices moving lower.”
Greiman says traders had spent days digesting the growing likelihood that New World screwworm would eventually reach the U.S.
“I think market participants got to a point where it felt like there had been enough negativity priced into this market with all the rumors flying around and the knowledge that it was getting closer to the border,” she says.
Just as important, the confirmation removed a major source of uncertainty.
“I think uncertainty is one of the biggest things that stresses the market out,” Greiman says. “There were all these questions: Will screwworm get to the U.S.? Won’t it? When will it show up? Where is it going to show up? That uncertainty causes risk.”
For investment funds and other large market participants, headline risk can be enough to trigger selling pressure. Once the industry had confirmation, traders could begin evaluating the situation rather than speculating about it.
“Taking that uncertainty out of the market kind of took a lid off the markets,” she says. “Now there’s no more rumors. It’s here, we know it’s here and we know we’re going to have to deal with it.”
Long-Term Implications Could Be Bullish
While the immediate focus has been on the market reaction, Greiman believes the longer-term implications could actually be supportive for cattle prices.
That’s because New World screwworm may further delay efforts to rebuild the nation’s cattle herd.
“It’s going to kick the can down the road on rebuilding,” she says.
Greiman notes that cow-calf producers now face additional costs and management challenges, including increased veterinary care, more labor and greater surveillance of animals to monitor for infestations.
“It’s hard to justify spending $4,500 on a bred heifer right now if you’re going to turn her out and there’s uncertainty around screwworm,” she says.
Any increase in mortality, health complications or carcass trim losses tied to infestations would further tighten an already constrained beef supply.
“All of that just puts more pressure on supply that’s already really tight domestically,” she says.
Market Attention Shifts Elsewhere
Now that New World screwworm has arrived, where does the market’s focus shift? Greiman says it’s a good question, but she believes the market’s attention may shift toward policy decisions and consumer demand.
“I think the next big question mark in this market is what happens domestically from a policy standpoint,” she says.
She points to ongoing pressure from policymakers to address high beef prices as consumers continue to face elevated food costs.
At the same time, demand remains one of the biggest variables for cattle markets.
Greiman says the industry has yet to see the type of seasonal strength in boxed beef values that would normally be expected this time of year. While retail data hasn’t shown consumers abandoning beef, she believes economic pressures could eventually weigh on purchasing decisions.
“We haven’t really seen a seasonal rally in the cutout yet,” she says. “That kind of leads us to believe that maybe the consumer is pulling back.”
Despite those concerns, Greiman still sees significant upside potential in cattle markets.
“I think there’s a lot of upside potential,” she says.
For now, the market appears to have moved beyond speculation about whether New World screwworm would arrive in the U.S. The focus has shifted to how the industry responds and whether an already historically tight cattle supply becomes even tighter in the months ahead.