A flesh-eating parasite known as New World screwworm has been found in livestock in Texas, and traders are buzzing over potential winners in the stock market.
Shares of Zoetis and Elanco Animal Health popped in Thursday’s trading, and typically dormant options markets on the stocks woke up with a heavy bullish bias.
Zoetis was last higher by nearly 4%, and Elanco was up 2% in midday trading.
Zoetis shares in the past five trading days
In particular, Zoetis saw volumes surge. The company last year received conditional approval from the U.S. Food and Drug Administration for an injectable product that treats and prevents reinfestation of the pest. Last month, the FDA extended its support by issuing emergency use authorization for the over-the-counter drug.
Options volume in Zoetis jumped to almost 20 times the daily average, with just under 12,000 contracts traded and almost 11,000 in calls. More than 4,200 calls were bought, compared to 1,200 calls sold and under 300 puts bought.
Early trading flows targeted the $85 level in the stock, including one trader who bought nearly $700,000 of the 80-calls expiring July 17 for about $5 per contract – a bet the stock will move another 5% higher by mid-July.
“Screwworm is now circulating in tens of thousands of animals across Mexico,” Scott Gottlieb, senior fellow at the American Enterprise Institute and former commissioner of the FDA, said via text. “If cases start clustering, or we see detection in wildlife like white-tailed deer, the odds of holding this at the border drop sharply. The biggest vulnerability is the next 18-24 months.”
Cattle futures are so far taking the news in stride, up more than 1% on the session but in the midst of a multi-year rally, up 50% from lows in late 2024. If the parasite spreads, beef supply could be strained, but the bigger question could be whether the news alone will spook Americans out of the drive-through lane.
“The number one preferred commodity in the U.S. is beef – Americans love their fast food so if you have any issue with the beef supply chain, it’ll have some market volatility,” said Ben Rand, Nebraska-based broker for Blue Line Futures and regional director of the Federal Crop Agency. “We just had a conditional use drug approved; U.S. producers can handle it.”
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