August live cattle (LEQ26) futures on Friday fell $1.50 to $241.175 and for the week were down 47 1/2 cents. August feeder cattle (GFQ26) lost $2.225 to $357.425 and for the week were up $3.525.
The cattle futures markets have turned choppy recently, as traders digest the potential ramifications of New World screwworm (NWS) on the U.S. cattle industry. On up days in futures prices, it appears the potential for less cattle supplies coming to market is center stage. On down days in cattle futures markets, the keen uncertainty regarding the NWS matter, including consumer attitudes toward NWS, seems to prevail. Uncertainty is generally bearish in raw commodity markets.
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The USDA Animal and Plant Health and Inspection Service (APHIS) on its NWS website now reports 12 total detected New World screwworm cases, in Texas and New Mexico.
“U.S.’s screwworm fix is still a year away, risking more spread.” That’s a weekend news headline from Bloomberg. “The U.S.’s key tool for suppressing the New World screwworm, a facility that breeds sterile flies, isn’t slated to begin operating until November 2027,” said the report. “The U.S. currently has only a fraction of the sterile flies needed to mount an effective response, with a facility in Panama producing 100 million insects a week and another plant in Mexico expected to come online soon. The U.S.’s best weapon against a deadly cattle parasite threatening the beef industry is more than a year away from showing meaningful results, raising concerns over how far the outbreak could spread before then,” said the Bloomberg report.
The next few weeks, or longer, will likely find NWS remaining on the front burner for the cattle futures markets. Concerns have so far leaned slightly price-friendly for cattle futures due to potentially lower U.S. beef production going forward, which is already lagging 6.5% behind last year’s pace.
Potentially bearish for the cattle futures markets is that U.S. inflation has now outpaced wage growth for multiple months. Despite inflation in beef cooling month over month, prices for that category are still up 12.9% from last year and are met by consumers that are being continually squeezed from other sectors in the economy as well.
The major U.S. stock indexes had backed off their recent record highs but have rallied back to trading not far below them, at present, due to the U.S.-Iran peace prospects. Any resumed and sustained selling pressure in U.S. equities could dent consumer demand for higher-priced beef at the meat counter. Also, gasoline prices at the pump above $4.00 a gallon for a sustained period would also likely crimp consumer demand for beef.
