Commodity Watch: Food Demand – Something Has to Give.

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" data-fr-image-pasted="true" src="/getContentAsset/e4db1c4c-2687-44cd-adbd-db1eb849e5d2/cb87803a-320c-480f-ab75-7b9029eaaf79/Ahmad-Al-Sati-new.jpg?language=en" alt="Ahmad Al Sati" title="Ahmad Al Sati" class="fr-fic fr-dii" style="width: 180px"></div><span style="font-size: 12px"><div class="col"><strong>AHMAD AL-SATI<br></strong>PORTFOLIO MANAGER<br><br><p>Ahmad is the President and Portfolio Manager for Gemcorp Capital Advisors LLC, based in New York.&nbsp;<br><br>Ahmad has spent most of his career in the global credit markets. Prior to Gemcorp, Ahmad was President of Pandion Mine Finance and RiverMet Resource Capital, LP - a fund focused on investing in precious metals, where he was responsible for managing the investments and the day-to-day operations of the registered investment adviser.&nbsp;</p></div></span></div><hr><p>The screwworm is named maneater in Latin after an incident in French Guyana (look it up), but it really wreaks havoc on cattle. The invisible “screwworm barrier” between Panama and Colombia is jointly administered by the US Department of Agriculture and the Panamanian government since 1994. Every week they release 15 million irradiated sterile male screwworms into the jungle to breed with the females and limit screwworm production. Using this technique, screwworms were eradicated in the US by the ‘70s and eliminated in Mexico and Central America by the ‘90s. The $15million program saves ranchers an estimated billion dollars annually.</p><p>The fly, indigenous to the Americas, lays its eggs in even the smallest wounds of a cow (for example, a healing ear tag). When the eggs hatch, they feed on the host’s meat, rendering them useless for consumption. Twenty years after successfully being eliminated in Central and North America, the parasite is breaching the barrier and moving north. In 2023, Panamanian cases of screwworms went from 25 cases/year to 6,500. And now screwworms have moved into Mexico- 700 miles from the US border. Weather and illegal cattle movement are the two culprits for the breach, but the exact cause is still unknown.</p><p>As a result, the US stopped importing cattle from Mexico this year. Mexico provides the US with 1 million heads/year and this ban comes at a time when the US cattle count is at historic lows (lowest since 1951). A 3-year drought starting in 2020 decreased grazing acres in the US as input prices went up. Higher costs and higher prices pushed ranchers to sell their cows rather than keep them for breeding. The impact is being felt today. Prices of steak and ground beef are up 12.4% and 10.5% from a year ago (beef prices are up 9% in 2025). Despite the high prices, demand for beef remains strong, which will continue to incentive ranchers to sell cows into the market and put downward pressure on the size of the overall herd. According to some estimates, supply will remain tight for the next 24-36 months, with continued elevated prices.</p><p>This beef dislocation is primarily idiosyncratic. Yet, we are increasingly seeing shortages across a wide range of commodities in agriculture and metals (for another post). We previously discussed greening’s impact on orange juice. Coffee is in short supply (weather events), as is cocoa (weather, disease and manipulation), as sugar was in ’23 (droughts and higher input costs). At the same time, the relentless demand for food from 8 billion people is not abating. Something has to give. And it will probably be prices as producers increase them to invest in supply chains and weather-proof their farms. Higher prices mean food insecurity and higher CPIs, which will put pressure on governments and central bankers the world over. With debts high and interest rates elevated, yet one more reason to focus on supply chains and monitor global inflationary pressures.</p>