Cattle bull market persists

Tighter cattle supplies are driving prices higher across feeder and cow markets. In the West, August steer calf prices surpassed $450/cwt for 400-500 lb animals. Prices for 500-600 lb steer calves rose 38% compared to last year with some of the summer video auctions as high as $600/cwt. This surge reflects the smallest feeder cattle supply on record. Consequently, prices in most Western regions have steadily increased this year, defying the typical seasonal decline as summer transitions to fall.

Cattle producers have been riding a bull market for some time, and the outlook suggests it may persist. Analysts predict the market could remain strong for another two to three years, as herd expansion is unlikely in the near term. The calf crop in the West has declined by 4.7% since herd contraction began, and heifer replacements remain low, further delaying herd rebuilding efforts. At the same time, strong margins continue to support robust cow-calf profitability. Retail beef prices have hit record highs, yet consumers are still purchasing beef, with sales of prime-grade products outpacing select-grade products in the spring of 2025. Additionally, cattle producers are benefiting from an abundant supply of affordable feed. Despite the optimistic outlook, now is an opportune time for producers to assess and manage risk to safeguard against potential market downturns. This includes ensuring access to adequate capital for feeder calves and margin calls, depending on their risk management strategy.

Beef trade balancing act

The beef trade is complex. In the first half of 2025, imports rose by 33% compared to the same period the previous year. The U.S. primarily imports 90% lean beef to blend with domestic lean trimmings, meeting the growing demand for ground beef. At the same time, the U.S. exports higher-value beef cuts (a common trade dynamic known as hierarchical market segmentation). The average export price for U.S. beef products is nearly $1 per pound higher than the average import price. However, import prices are under upward pressure as imports from Brazil have slowed (likely due to tariffs), forcing producers to source from higher-cost suppliers. Meanwhile, export prices are under downward pressure due to limited access to the Chinese market.

The suspension of tariff increases on China has been extended by 90 days, maintaining the 32% tariff rate and avoiding triple-digit rates. However, U.S. beef exports to China remain restricted as China has not renewed registrations for several U.S. processing plants, a requirement under Chinese customs regulations. Meanwhile, China has offset reduced U.S. imports by increasing purchases from Brazil.

New World Screwworm case in Maryland sparks concerns 

A case of New World Screwworm (NWS) was reported in Maryland in late August, linked to an individual who had traveled to Guatemala, a region where the fly is present. While this isolated incident does not pose an elevated risk, it has sparked keener interest in the potential and actual impacts of NWS on the U.S. cattle industry. 

There are two key concerns to address. First, what would it cost producers if NWS were to spread to the U.S.? The last time NWS was present in the U.S. in the 1970s, it caused an estimated $81.51 in losses per infected head of cattle, according to USDA APHIS. Adjusted for inflation, this figure rises to approximately $453.14 per infected animal. If an outbreak were to occur today, it could result in an estimated $1.8 billion in economic losses in Texas alone. This estimate does not account for additional factors, such as changes in cattle populations or the potential for the parasite to spread further north due to warmer weather, which could significantly amplify the impact compared to previous outbreaks. 

Second, what are the implications of NWS to the beef supply chain? USDA has implemented a ban on live cattle exports from Mexico to the U.S. as a precautionary measure to prevent the introduction of NWS. This restriction has left over 100,000 Mexican cattle unable to cross the border, according to Mexican estimates. The border closure has been a back-and-forth saga, with brief openings in the spring, June, and July, only to be followed by subsequent closures. During one brief reopening, approximately 900 cattle were able to cross into the U.S., but the overall disruption has created challenges for producers on both sides of the border. For U.S. producers, the ban is expected to keep cattle prices elevated due to reduced supply from Mexico. However, the restriction could also remove more than 5% of the beef supply that the U.S. relies on, potentially straining the market further and creating ripple effects throughout the supply chain. Mexican producers, meanwhile, face mounting financial pressures as they struggle to find alternative markets or manage the growing backlog of cattle.

Profitability

Cattle feeders: Profitable - Neutral 12-month outlook
Cow-calf producers Profitable - Bullish 12-month outlook

Despite increased competition for feeder cattle, low feed costs and higher fed cattle prices are projected to support profitability through 2026.

Tight cattle inventories, strong prices, and improved forage conditions support a favorable outlook.