Prices for U.S. cattle and hogs plus shares of top U.S. meat companies sped lower on Thursday, amid worries that turmoil in the U.S. credit markets could snowball and hurt meat sales both here and overseas, economists said.
"Consumer spending would be affected...there could be a reduction in demand because of the credit crunch," said Jacinto Fabiosa, a director at the U.S. Food and Agricultural Policy Research Institute in Ames, Iowa.
The United States exports about 15 percent of its chicken and pork and about 5 percent of its beef. A major concern is that the credit issues will hurt overseas economies which could hurt U.S. exports and spark an expansion in meat supplies.
"If it hits a country where a significant portion of their income is spent on food, then the ripple effect in that country will be significant," said Fabiosa.
If those countries are major importers of U.S. products, the effect would be felt here, he said.
At the Chicago Mercantile Exchange, the August cattle contract was down nearly 2 percent on Thursday at 90.350 cents per pound, and the October hog contract was down nearly 1.5 percent at 67.55 cents per pound.
Some of the drop in the hog futures was attributed to news on Wednesday that China had banned pork from several U.S. pork plants, because traces of a growth promoter was found in the meat.
Shares of Tyson Foods, the largest U.S. meat company, were down about 2.66 percent at $19.02, while shares of top U.S. pork producer Smithfield Foods were down about 4.7 percent at $28.53. Shares of Pilgrim's Pride, the largest U.S chicken company, were down about 3.5 percent at $33.81.
Fear was fueling much of Thursday's selling in stocks and commodities, Fabiosa said.
"I think everybody is antsy as to what kind of monster we are facing right now," he said.
One concern is the credit turmoil could cause a recession and curb consumer spending both here and abroad. "If it turns into a recession, then we would have people moving away from eating at restaurants, and trading down in terms of prices of items they would buy," said Jim Robb, economist at the Livestock Marketing Information Center.
A recession would prompt overseas consumers to buy less expensive meat cuts, he said.