High prices, but pasture conditions worry grows

The cattle industry continues navigating record high producer profitability, alongside mounting structural risks, particularly for feedlots and packers.

Record or near-record cattle prices are being driven by the smallest U.S. cattle inventory in more than 70 years and sustained beef demand. High calf prices, historically strong cull cow values and moderating feed costs have pushed cow-calf returns above long-run averages. According to the Livestock Marketing Information Center (LMIC), margins for cow-calf producers are expected to exceed $1,000 per head, providing breathing room for balance sheets that have absorbed elevated operating costs in recent years.

Seasonal price patterns suggest additional upside potential for calf prices in the months ahead. Historically, steer calf prices tend to trend higher through the year, reaching a peak sometime during the second half of the calendar year. This seasonal strength may help prevent further herd reductions or forced liquidations, assuming demand remains intact and drought conditions do not deteriorate significantly.

Input cost dynamics remain a growing area of concern for cow-calf operations. While calf prices continue to provide revenue support, hay and forage costs are trending higher as water allocations are reduced, snowpack remains limited and wildfire risk increases early in the season across much of the West. Similar conditions in South Dakota and Nebraska created massive wildfires in March and have driven immediate, localized surges in hay demand, signaling potential price pressure as the season progresses. Feed availability and cost inflation remain a key risk, particularly for producers without secure forage supplies. As a result, the cost advantage cow-calf operators have recently enjoyed may narrow, adding pressure to margins if dryness persists.

Some structural risk lies in the gap between record high cattle acquisition costs and the industry’s ability to sell cattle at comparably strong values. Whether cattle are purchased or raised at historic cost levels, profitability across the supply chain requires consistently selling finished cattle at top-tier prices. Feedlots are committing unprecedented working capital to place feeder cattle, increasing exposure to price volatility if fed cattle prices soften, while packers continue to face margin compression as cattle prices outpace boxed beef values. Sustained beef demand is therefore critical and proactively utilizing risk management strategies can help mitigate any potential downside risk.

Profitability

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

Cattle feeders are currently profitable, supported by firm fed cattle prices and manageable feed costs. However, tighter feeder supplies and dry weather conditions pose growing headwinds.

Tight cattle supplies, strong calf prices and steady beef demand are keeping cow/calf producers very profitable. Slow herd rebuilding is expected to support strong margins throughout the year.