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Cattle costs have tumbled because the US authorities steps up measures to comprise the unfold of a chicken flu outbreak among the many nation’s cow herd.
The US Department of Agriculture at the beginning of this week banned contaminated cattle from crossing state borders and mentioned it could check floor beef for chicken flu particles, because the UN’s World Health Organization expressed concern concerning the virus’s potential to unfold outdoors of the US.
Highly pathogenic avian influenza, or HPAI, has been present in dairy herds throughout 9 states, together with Texas, the place one dairy employee has additionally examined constructive for the virus. Viral fragments have additionally been discovered within the nation’s milk provide.
The USDA confirmed on Wednesday that the bottom beef samples had examined damaging for the virus, however merchants have however reacted to the outbreak.
Live cattle futures traded on the Chicago Mercantile Exchange dropped greater than 6 per cent on Wednesday from above $1.85 per pound to beneath $1.74 per pound.
The USDA mentioned it was assured that each the nation’s meat and dairy provides had been secure, however merchants’ fears that the danger of contamination might knock demand had nonetheless pushed down costs, in accordance with analysts.
“Perception is reality when it comes to food in the consumers’ eyes obviously,” mentioned Arlan Suderman, chief commodities economist at dealer StoneX. “If they perceive a problem, whether there’s a problem or not, there’s a problem.”
He added that bulletins across the outbreak have “had a big impact on the psychology of the futures market”.
Cattle futures had soared to document highs in recent months, as drought within the west and south of the US has compelled ranchers to chop the nationwide herd to its smallest since 1951, crunching provides.
With costs rising, speculators piled into the futures market betting on additional good points, mentioned Suderman. But this week’s bulletins from the USDA have induced lots of these merchants to ditch these lengthy positions, he added.
“All of a sudden, you introduce this uncertainty and that creates fear and managed money says, ‘why should we continue to risk our money maintaining ownership of this asset, when we don’t know what the next headline is going to be’,” mentioned Suderman.
Last week, Colombia banned the import of beef merchandise from sure US states in response to the detection of the virus in dairy cows.
The South American nation is barely a small importer of US beef, mentioned Suderman, however the market reacted when that information hit as a result of merchants had been pondering, “even if it’s just a small customer, is this just the first shoe to drop, will there be more?”
