Rumors of a fourth case of Bovine Spongiform Encephalopathy started percolating Tuesday over the noon hour, leading to a sharp selloff in the cattle complex. The front five months closed down the $3 limit, with the next two contracts settling near their daily trading limit lower.
For complete details on the story itself, read this piece from my Feedstuffs' colleagues Sarah Muirhead and Rod Smith.
The reason for the selloff, of course, is the uncertainty of how trading partners might react in the face of the nation's first case in six years. Early indications from major trading partners supported the assertion made by USDA's chief veterinarian John Clifford that the discovery of an atypical case of BSE in a California dairy cow: nothing to see here.
Mexico, the E.U. and Japan all indicated they had no plans to disrupt import of U.S. beef following the announcement. Wire reports indicated, on the other hand, that South Korea - a country long known for its political nervousness regarding BSE - would halt customs inspections at least temporarily as two retailers apparently suspended sales of U.S. beef.
Farm Futures' John Otte offered some early observations from the overnight trade:
Overnight livestock trade suggests cattle and hogs should recover some of yesterday’s losses. Fed cattle locked limit down when news that a dairy cow in California turned up with Bovine Spongiform Encephalopathy.
The story was the lead item on the 6 p.m. news. Broadcasters followed with assurances that none of the meat from the infected cow entered the food chain and that U.S. beef is safe.
Consumers have not panicked. Domestic beef demand may recover. How consumers actually do react will unfold over coming days.
I've spent the past three days in Washington, D.C. with members of the National Association of Farm Broadcasting, which has become Ground Zero for ag news this week with the BSE announcement and this news that the Senate Ag Committee postponed this morning's scheduled markup of the Farm Bill.
Of interest in terms of what I call "inside baseball" is how the BSE story "broke." USDA typically makes these type of announcements before or after the close, which is apparently what was planned yesterday. Per standard operating practice, USDA's media shop apparently shared the news early with the "inside media," those news organizations with office space inside the USDA headquarters on an "embargoed" basis.
Someone, however, broke that embargo, and by 12:48 at least one wire service had circulated the news that the Department would host a press conference at 2:15 on an unspecified topic. The rest, as they say, is history, as the markets and the internet caught wind of the presser, rumors regarding BSE surfaced, and the market dropped like a stone.
We'll see what happens when pit trade opens in the next hour, but at this point, hopefully the worst is behind us.
UPDATE: The U.S. Meat Export Fed. says rumors and wire reports about Korea shutting off U.S. beef imports are false : "Korea enhanced its level of surveillance at ports, but U.S. beef is still clearing customs."