April 20, 2024

(Bloomberg) — A virus that has killed millions of birds is spreading among US dairy cows, raising concerns that the outbreak may hurt demand for dairy and beef.

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While the US Department of Agriculture has said there’s little safety risk, the outbreak is unsettling the industry, with cattle and milk prices taking a hit. There’s concern some shoppers will balk at drinking milk or eating beef.

“Risks to consumer demand for dairy are prevalent in conversations,” StoneX Group Inc. analyst Dave Kurzawski said in a note to clients. He added that while there are “big risks on the table,” the impact of the illness on buyer behavior is unclear.

Read More: How Bird Flu in Mammals Sparks Fear of Human Spread: QuickTake

Bird flu has been confirmed in dairy cows across several states, with the USDA saying Monday it has been found in New Mexico and five additional herds in Texas. The virus has even infected a person in Texas, while the biggest US egg producer idled a plant after the virus was found in the facility.

The infection of cows by the same virus strain that emerged in Europe in 2020 — and has since caused an unprecedented number of deaths in wild birds and poultry globally — is also raising concerns on the supply side.

Infected Texas dairy cattle are experiencing decreased lactation and low appetite, with older cows more likely to be severely impacted. Some herds have reported pneumonia and clinical mastitis — an inflammatory disease — the Texas Animal Health Commission said by email. Most animals seem to recover in as many as two weeks with supported care, albeit with reduced milk production levels.

Some cows may never see their milk production recover to pre-infection levels, in which case they might be culled, according to a HighGround Dairy report Monday. “The longer-term impact on supply is not entirely clear, as farmers are trying to maintain herd inventories in a time of tight cattle supplies,” it said.

For an individual farmer who has already been struggling with low prices and low margins, even a small amount of lost production adds another challenge, according to Alan Bjerga, executive vice president of communications and industry relations at the National Milk Producers Federation. But he added that the overall impact to the industry should be mild.

“When you consider the tiny number of farms with confirmed illnesses, the limited number of cows affected, the limit of that sickness to only older animals, and the fact that cows that become ill eventually recover to produce milk again,” the impact on the milk supply is minuscule, he said.

While no cases have been found in beef herds so far, cattle futures fell 2.7% on Monday following the confirmation of a person in Texas had been affected. The market trimmed some losses on Tuesday.

The person in Texas most likely contracted bird flu after being exposed to infected dairy cows, public health officials said. The US Centers for Disease Control and Prevention said the risk to the general population remains low.

Read More: What We Know About Bird Flu in Dairy Cows and People

“The market has made a huge leap here into the idea that beef demand is definitely going to be severely impacted by bird flu,” Dennis Smith, an analyst at Archer Financial Services Inc., said in an interview.

Meanwhile, milk futures have fallen for four straight days on the Chicago Mercantile Exchange, even as the USDA said the contamination of cows poses no major threats to the safety of milk and other dairy products sold at grocery stores because they’re sterilized before entering the market.

Still, milk from impacted animals is being diverted or destroyed so it doesn’t enter the human food supply, and the CDC said people should not eat uncooked or undercooked food from animals that may be infected. The Food and Drug Administration isn’t aware that any milk or dairy product from symptomatic cows has been sent for commercialization.

“There continues to be no concern that this circumstance poses a risk to consumer health, or that it affects the safety of the commercial milk supply,” the USDA said. In addition, milk loss has been too limited to have a major impact on supply and prices, the agency said.

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