Now that the New World Screwworm has officially crossed the U.S. border with Mexico, how will the cattle markets react? Arlan Suderman, the chief commodities economist for StoneX, said the markets have been anticipating this would happen at some point.
“We’ve been seeing some weakness in this market the last few days on the market fearing the possibility, not knowing how the funds that held big, long positions would react to that. I think there’s that primary concern. We don’t really see this as a bearish development from a fundamental standpoint. That doesn’t mean that the markets will necessarily behave that way when you have the amount of fund money in there.”
Suderman said it’s important to remember this isn’t a food safety issue.
“I think it’s important to recognize that this is far different than the mad cow disease, which contained a potential human threat type of thing. This doesn’t do that. The New World Screwworm will increase the cost to producers to manage this pest. It is in no way a human health hazard to eat meat from animals where the pest has been found type of a thing. This affects the thriftiness and the health of the animal, so to speak, from the standpoint of irritation and problems on its flesh that the farmer and the rancher need to care for and treat, but it shouldn’t be a demand threat at all. So, we don’t look for that to be a problem.”
Brazil has dealt with the New World Screwworm for years, which he said hasn’t limited Brazil’s exports. If there is a drop in U.S. beef export demand, Suderman said that will likely be more of a political issue.
“Oftentimes, it is political in nature. In this case, we’re seeing Brazil export to many of the major markets that we would do business with, and our exports, because of our tight supply, aren’t that big anyway. Domestic demand is the bigger part of it, because of our tight supply. China has been buying from Brazil, and that’s one option we’ve been seeing as a possibility of China buying our beef, so I wouldn’t see that being a problem with China either. So, overall, I just don’t expect a problem from the flat fundamental standpoint. We just need a little time now to reassure the fund money that’s the case.”