The cattle industry faced significant market fluctuations in October, with futures markets responding to key developments such as tariffs on Brazilian beef imports, the possibility of reopening the Mexican border for live cattle imports, potential increases in Argentine beef imports, and the absence of critical data reports.
Supply constraints
The U.S. cattle herd is currently at 70-year lows, and cattle and retail beef prices have reached record highs. Prolonged drought in key cattle-producing regions, coupled with soaring input costs, has significantly reduced the cattle herd. At the same time, strong consumer demand for beef has persisted, even as retail prices climb, further driving record-high cattle and beef prices.
Recent policies have further constrained cattle and beef availability.
Live cattle imports from Mexico remain halted due to the threat of New World Screwworm (NWS). This closure is preventing the import of approximately 100,000 feeder cattle from Mexico each month, significantly impacting Texas and other border states while creating bullish conditions for cattle markets nationwide. Although talks to reopen the border have resumed, rising NWS cases near the U.S. border make this unlikely in the near term.
The 50% tariff on Brazilian beef, implemented on August 1, is projected to slash imports from Brazil by 70%. With Brazil traditionally providing lower-cost beef cuts, U.S. processors are now relying on pricier suppliers, adding further pressure to the market. Although negotiations between the U.S. and Brazil resumed in late October, no changes to the current tariff rates have been made at the time of writing.
High beef prices caught the attention of President Trump, who, in an October 22 Truth Social post, attributed strong markets and industry profitability to tariffs. He called on U.S. cattle producers to bring down consumer prices. Following this, the administration announced plans to boost imports of Argentine beef, triggering a sharp decline in cattle futures. Cattle future markets dropped by over 10% in the following two weeks, with cash markets also trending downward.
While bearish for markets in the short-term, the role of Argentine beef in alleviating U.S. beef prices is complex and uncertain. Currently, Argentina is allowed to export up to 20,000 metric tons of beef to the U.S. under a tariff rate quota. Once this quota is met, additional imports face tariffs exceeding 40%. Expanding this quota to 80,000 metric tons, as suggested by the administration, may not meaningfully lower U.S. beef prices beyond the short-term. Following the announcement, box beef prices increased during the last two weeks of October. Additionally, Argentina’s history of restricting beef exports to stabilize its domestic market raises questions about its reliability as a consistent supplier. Ultimately, the fundamental dynamics of tight supply and strong demand are expected to remain the primary drivers of price, outweighing the effects of market interventions.
When will herd rebuilding begin?
A key question in the cattle industry is when herd rebuilding will start. The Cattle on Feed report is typically a vital indicator of this shift, but no official data was released for October due to the government shutdown. Analysts estimate that October’s cattle on feed numbers likely fell below 11.4 million head, with a 2% reduction expected. The absence of data also leaves a gap in understanding steer-to-heifer ratios in feedlots, a critical metric for predicting herd expansion. Previous reports indicated fewer heifers on feed, suggesting potential for future growth, but without updated figures, this remains uncertain. Once rebuilding begins, it will take approximately two years for meaningful herd growth to materialize. Cattle prices are expected to remain elevated throughout this period.
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.
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