Any kind of animal-related disease sends tremors through the futures markets and raises concerns about everything from animal prices to meat exports. It was thus no surprise that live cattle futures prices plummeted on March 25 after reports that the highly pathogenic avian influenza (HPAI) was detected in a number of dairy herds and resulted in a person contracting the virus.
An initial report was that a herd of dairy cattle in Michigan that had recently been relocated from Texas tested positive for HPAI, according to USDA and the Michigan Department of Agriculture and Rural Development. The two agencies on March 25 also confirmed the detection of HPAI in two dairy herds in Texas and two dairy herds in Kansas that had cattle exhibiting symptoms. Presumptive positive test results have also been received for additional herds in New Mexico, Idaho and Texas. USDA also confirmed that the strain of the virus found in Michigan was very similar to the strain confirmed in Texas and Kansas and appears to have been introduced by wild birds.
A further report on April 1 said a person who worked on a Texas dairy farm and had direct contact with dairy cattle tested positive for avian flu late the week before. This report caused the April live cattle contract to fall 492 points. The April contract had closed on March 21 at $188.37/cwt, so it lost 830 points by April 1. The irony is that no beef cattle then and until now have been found to have contracted the virus. But the futures market clearly did not like what it read.
However, the market only two weeks later appeared to have put aside its concerns about the impact of HPAI on both live cattle prices and the wholesale beef market. Futures prices advanced on April 15 and 16 even though USDA’s Animal and Plant Health Inspection Service (APHIS) listed a total of 28 confirmed cases by then. At least 18 states by then had placed restrictions on the movement of dairy cattle. USDA also announced restrictions on dairy cattle transported between states, including requiring them to be tested for HPAI and mandatory reporting of cows that are infected with the virus.
Questions remain about some aspects of the disease, including exactly how the disease, now known as bovine influenza A virus (BIAV), is spreading between cattle, said Oklahoma State University agricultural economist Derrell Peel the week before last. But the markets have settled into the knowledge that the disease has relatively minor impacts on cattle and has no human health implications for meat or pasteurized dairy products. Barring any new surprising information, cattle markets should move on with market fundamentals, he said.
One development was that USDA on April 29 said it was collecting samples of ground beef in states with outbreaks of bird flu in dairy cows for testing. It will analyze the ground beef to determine whether any viral particles are present. USDA is collecting muscle samples at slaughter facilities of dairy cattle that have been condemned. It will also use a virus surrogate in ground beef and cook it at different temperatures to determine how the virus is affected, it said.
There are no known cases to date of bird flu in beef cattle and USDA several times has said it remains confident the meat supply is safe. But this did not prevent speculation about what might happen if USDA’s testing found HPAI in ground beef. One of my contacts emailed me, wondering if there would be a scenario that could cause mass selling by farmers and ranchers as they see cattle prices plummet, or hold on to wait out the virus and not take losses. I assured him that any selloff was not going to happen. But I suspect the beef industry will have a slight HPAI cloud over it for a while.
The greater concern will be over the strength of beef demand as the grilling season starts. March retail prices increased from February and were sharply higher than in March last year. USDA’s All Fresh Beef price averaged $7.89 per pound, up six cents from February and up 9.1% from last year. USDA’s Choice beef price averaged $8.12/lb., up four cents and up 6.3%, respectively. Retail prices likely continued to advance in April. A key question is how aggressive retailers will be in promoting beef during May. — Steve Kay, WLJ columnist
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
