The detection of New World Screwworm (NWS) in Texas and New Mexico has added an extra layer of uncertainty to cattle markets, though so far the reaction has been mostly positive as August live cattle are up $3.325 since the first NWS case was confirmed on June 3, with August feeders also up $14.80 as of the June 12 close.
The USDA has taken emergency actions including quarantine zones and conditional approval of dewormers, such as ivermectin, that ranchers are already familiar with, for treatment. While the quarantine appears relatively effective so far, an outbreak could quickly change the landscape. Texas is the state most vulnerable to further spread at this point based on its climate and proximity to the relatively less strict measures being taken across the southern border.
The state comprised 14% of all cattle including calves in the U.S. according to the most recent January Inventory report, the highest of any state in the union. The May Cattle on Feed report showed the state had 22.3% of the country’s total as well, behind only Nebraska at 22.8%. For context, last year Iowa, known for being the top producing corn state, produced 16.8% of the country’s corn. This showcases that cattle production is very highly concentrated even compared to other agricultural commodities, with concentration firmly in the state that is the most vulnerable to further screwworm infestations.
While the parasite is treatable in most cases, slower weight gains and total animal loss in more severe cases will further restrict the supply of beef if the outbreak spreads. Beef production is already trailing last year’s pace at this time by roughly 6.5%, and has been kept from trailing even farther from the increased carcass weights that have been seen in recent years. While the degree of screwworm spread will determine the ultimate impacts, the pest’s presence in the Lone Star state undoubtedly keeps the tailwind of historically tight supplies of beef cattle alive.
The pest does not contaminate beef that has already been processed, and poses no risk to food safety for consumers. USDA Secretary Brooke Rollins, as well as other officials, have been on the press circuit ensuring that message is conveyed as headlines highlighting the parasite’s flesh-eating ability hit mainstream media.
So far consumers have not shown any signs of looking for alternative protein sources, with weekly grocery store reports showing the activity index (the total number of promotions ran for beef), and feature rates (percent of stores advertising beef at all) both up since the initial confirmation of the pest inside the U.S.
USDA did lower their total consumption per capita 0.2 pounds per person to 59.8 pounds in Thursday’s WASDE report, though that can mostly be attributed to lower production and not a softening of demand.
Also see: Beef prices see May decline as overall inflation runs hot. Screwworm complicates the outlook.