Turbulence fades as fundamentals support strong cattle prices

The cattle markets have experienced significant volatility over the past several months. Despite this turbulence, underlying supply and demand fundamentals remain intact. In September, renewed discussions around reopening the U.S.–Mexico border to cattle; expanding Argentine beef imports; and political rhetoric aimed at lowering retail beef prices all contributed to a softening in both futures and cash markets. Seasonal factors also played a role, as calf supplies typically increase during this time of year. Together, these dynamics led to a roughly six-week decline in cattle futures and weakening in the cash market. However, by late December, both futures and cash prices had rebounded to record levels and continue to strengthen in early 2026. This rebound underscores the strength of underlying market fundamentals, and reinforces expectations for sustained and likely higher cattle prices heading into 2026.

Looking ahead to 2026, beef production is expected to decline further. USDA forecasts production at roughly 25.7 billion pounds, down about 1% year over year. However, this outlook appears optimistic, as many analysts anticipate a steeper decline of 2–3%. USDA’s estimate might also have assumed a partial reopening of the U.S.–Mexico border to feeder cattle imports, an outcome under discussion since late 2025. Recent developments suggest reopening is unlikely in the near term. Two cases of New World Screwworm (NWS) were reported in northern Mexico in late December 2025, and one in early January, further complicating prospects for resumed trade.

If the border remains closed, the U.S. feeder cattle supply could be reduced by approximately 5%, or about 1.2 million head. Even if reopening were to occur early in the year, it would likely take several months for the border to become fully operational. Additionally, Mexican feeder cattle typically take up to 12 months from import before they are ready for slaughter, and there remains a risk of renewed border shutdowns similar to those experienced in 2025. These factors point to lower cattle placements for much of 2026.

Competition among packers for cattle is expected to remain intense in 2026, even with a modest reduction in processing facilities. Tyson Foods recently announced the closure of one of its beef processing facilities that accounted for 5% of daily U.S. beef slaughter. With this facility closing, it is estimated that the new capacity utilization will nationally be closer to 90%. Anecdotally, in the Western U.S. meat packers have seen less of an impact and higher utilization compared to plants in the Midwest and Southern U.S. However, in an environment of lower production and sustained demand, cattle producers are positioned for another year of strong cattle prices.

On the consumer side, while political pressure to reduce beef prices continues, strong demand suggests that relief for retail prices is unlikely in the near term. Instead, it may take several years before retail beef prices decline in a sustained and meaningful way. On the export front, global trade dynamics continue to evolve. Brazil is expected to surpass the U.S. as the world’s largest beef exporter in 2025, reflecting productivity gains and competitive pricing that have shifted trade flows. Meanwhile, China’s beef trade policy remains highly volatile. In December, China imposed an additional 55% tariff on beef imports exceeding quota levels from key suppliers, including the U.S., to support its domestic cattle industry. The near-term impact on U.S. exports is expected to be limited. In recent years the U.S. has shipped well below the new quota amount. Modest market access gains are possible in 2026 if China relists additional U.S. facilities, but policy uncertainty remains and exports are unlikely to exceed quota limits in the near term.

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.