Cattle market volatility and tariff update

Volatility has recently emerged in the cattle markets, diverging from typical seasonal trends. While late summer and fall usually bring a surge of calves and lower prices, this year saw prices peak by mid-October before declining. Nationally, 500-600 lb steer calf prices dropped 9% from October to November, as the market priced in the possibility of reopening the Mexican border, reduced tariffs on Brazilian beef and increased Argentinean beef imports, versus seasonal factors. Despite the decline, prices remain historically strong. Even with the strong income, producers face rising production costs.

Tight cattle supplies are driving challenges for feedlots and packers, with processing facilities running at just 76% capacity, the lowest in over a decade. If low utilization persists, some facilities may close in 2026. While the planned closure of two plants will reduce overall capacity by 7.5%, there will still be 20,000 more hooks than the beef available for packers.

The sharp rise in retail beef prices, up over 13% from last year and 25% from the five-year average, has sparked significant debate. The presidential administration has called for a renewed investigation into meat packers, though a similar investigation occurred in 2021. It’s unlikely that government investigations will lead to lower retail beef prices in the near term. Meanwhile, consumers continue to buy beef despite high prices.

What are the tariff rates for beef, and how do they impact U.S. producers?

For U.S. producers, maintaining strong international trade relationships and market share is critical. Given shifting trade policies, year-to-date U.S. beef exports are down 10% compared to last year, with exports to China—the third-largest market—dropping 39%.

On Aug. 1, the presidential administration revised tariff rates. The top five export markets for U.S. beef—Japan, South Korea, China, Mexico, and Canada—account for 76% of all U.S. beef exports. The U.S. primarily exports beef cuts less popular domestically, such as short plate cuts, short ribs, chuck short ribs, and gooseneck rounds. Current import duties for South Korea (which represents 21% of total export value) and Japan (accounting for 18% of exports) are 2.7% and 21.6% respectively. Meanwhile Canada (13% of export value) and Mexico (13% of export value) remain exempt from additional tariffs under the USMCA agreement. China’s trade restrictions on U.S. beef have been volatile. In May, reciprocal tariffs raised the import duty on U.S. beef to 147%. Additionally, many U.S. beef processing facilities lost their export licenses to China (which previously accounted for 15% of export value). Since then, tariffs have dropped to 32% (as of the date of this report), and some facilities have regained export approval. There is potential for further market access, as China may relist 20 more U.S. plants for beef imports in the near term. While these developments offer hope for increased trade, ongoing negotiations and policy shifts mean uncertainty about the future of U.S.-China beef trade persists.

On the import side, tariff adjustments have also been made. About 70% of these imports are lean beef trimmings used for ground beef. Australia now faces a 10% duty (up from 0%), and New Zealand's rate increased to 5%. Argentina’s tariff quota quadrupled to 80,000 metric tons with duty rates unchanged.

On Nov. 14, an executive order reduced Brazil’s beef tariff by 40%, lowering the effective rate to 26.4%. Earlier this year, higher tariffs had slashed Brazil’s beef shipments to the U.S., forcing U.S. processors to turn to higher-cost suppliers. As a major supplier of lower-end beef cuts, Brazil’s reduced presence strained the market.

Brazil’s tariff reduction is expected to lower costs for U.S. meat processors and improve market access, helping to protect market share. During the period of elevated tariffs, Brazil redirected much of its beef exports to Mexico and China, potentially impacting U.S. competitiveness.

In the short term, U.S. meat processors will remain reliant on imported beef to meet domestic demand, maintain affordable beef prices, and make operational adjustments, at least until the U.S. cattle herd expands. Some packing plants are closing facilities. It’s reasonable to anticipate that during this downturn, packing plants facing financial losses may close or reduce shifts at their least efficient or oldest facilities.

Profitability

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

Tight calf supplies and robust demand have intensified competition for feeder cattle. Profitability is expected to remain resilient, supported by cost-of-gain efficiencies and strong box beef prices.

Historically tight cattle inventories, limited availability of replacement heifers, and firm calf prices continue to underpin profitability for cow-calf operations.