A flesh-eating monster has invaded the American South…
The creature is only a little larger than a housefly. But the damage it causes is horrifying.
The New World screwworm fly doesn’t just bite and leave. Females lay eggs inside open wounds, usually in farm animals. When the larvae hatch, they begin feeding – not on dead tissue, but on living flesh.
If left untreated, a single infestation can be deadly. And large outbreaks can devastate livestock herds.
In 1935, a U.S. Department of Agriculture (“USDA”) survey found about 1.2 million screwworm cases in Texas. Data suggests the parasite infested between 2 million and 3 million animals in some years. Some producers in the state were forced out of business.
When the U.S. eradicated screwworms in 1966, it solved an economic nightmare…
As one cattleman put it, “The control of screwworm ranks with the completion of the railroads into the West and the fencing of the open range in its impact on beef production methods in this country.”
And for nearly 60 years, we’ve been free of screwworms… But last week, they finally returned.
On June 3, the USDA confirmed the first U.S. screwworm case in decades…
Screwworm larvae turned up in a three-week-old calf in Zavala County, Texas. But before you panic, this isn’t another 1960s-style outbreak.
The government is responding aggressively. Officials quarantined the affected ranch and released sterile male flies to prevent the pest from reproducing.
Still, the timing couldn’t be worse.
Today, the U.S. cattle herd is its smallest since 1951. A screwworm epidemic would only tighten that supply further.
With this limited supply setup, you’d expect the screwworm news to be bullish for cattle prices. But the situation is complicated.
When the first screwworm case was confirmed, cattle futures actually fell slightly. So the market wasn’t pricing in a future supply shock. Instead, it may have been preparing for something else entirely…
Demand destruction.
A New Bull Market in Animal-Health Stocks Is Heating Up
With screwworm present in the U.S. cattle herd, beef export bans and livestock movement restrictions could follow.
That’s the near-term worry. But long term, the outbreak creates another reality: The cattle industry will have to fight back.
And that places animal-health companies in the spotlight.
Consider one company, Elanco Animal Health (ELAN)…
Elanco is a leader in veterinary medicine. And it’s an industry leader in screwworm care. In April – before the U.S. outbreak was detected – Elanco won emergency authorization from the Food and Drug Administration for its livestock screwworm treatment.
That gives the company a head start. When ranchers reach for screwworm treatments, Elanco’s products will be there on the shelf.
Investors have already started rewarding the stock…
Elanco shares have surged 84% over the past year. But with the new screwworm outbreak, this bull run could soar even higher.
Take a look…
Screwworms are back in America for the first time in 60 years…
This horror-movie parasite poses a huge threat to the beef and dairy industries. But as we’ve often seen, frightening headlines can also create opportunities.
The companies working to contain the crisis are likely to benefit. And that means it’s worth keeping an eye on animal-health stocks today.
Good investing,
Sean Michael Cummings
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Source: Daily Wealth
