Cattle update - Tighter supplies, slower slaughter

USDA lowered its beef production forecast in response to slower‑than‑expected steer and heifer slaughter rates early in 2026. Total commercial cattle slaughter declined 8.5% in the first quarter, reflecting tighter fed cattle availability. Heavier carcass weights, up more than 34 lbs on average during the quarter, helped offset some of the decline in slaughter but were not sufficient to prevent an overall reduction in beef production.

Commercial slaughter echoed national trends across the Western states. First quarter slaughter declined in California, Idaho, Oregon and Washington, consistent with broader national reductions. In Montana, first quarter cattle slaughter was relatively stable compared to 2025, though more recent reports indicate slaughter activity has softened in April due to lighter animals.

Despite reduced slaughter levels and tight supplies, beef demand remains resilient. Packers continue to search for additional lean beef to blend with excess fat currently on the market in order to support ground beef demand even as production tightens. Heifers accounted for 37.3% of cattle on feed, unchanged from last year. This indicates minimal herd retention and suggests limited near‑term expansion in the U.S. cow herd. Anecdotal reports suggest some Western producers are diversifying operations by maintaining base cow herds, retaining heifers and marketing bred heifers, creating more consistent revenue streams across both spring and fall.

Drought conditions are intensifying and remain a key constraint to herd rebuilding efforts. Pasture conditions and upcoming hay production will be critical in determining cattle production capacity heading into 2026. As of May 5, 61% of national U.S. cattle production areas were experiencing drought, up sharply from 31% a year earlier. Within AgWest states, Idaho and Montana are facing some of the most severe conditions, while drought across much of the remaining Western U.S. remains comparatively manageable. In contrast, conditions are worsening across some of the largest cattle production areas in the Central and Southern Plains, where 52% of Oklahoma, 71% of Texas, and 75% of Nebraska cattle regions are currently classified in D2 (severe) drought or worse.

Cattle prices remain historically strong. Feeder and fed cattle prices have held firm, reflecting tight supplies and continued demand. On average, 550‑pound steer prices increased 33% year over year to exceed $5.05 per pound nationwide in April. Fed steer prices are also higher, rising 14% year over year to average more than $2.47 per pound. While the fed cattle cash market softened earlier in April, prices strengthened again toward month’s end.

On the global stage, elevated U.S. beef prices are weighing on export competitiveness. U.S. beef prices remain significantly higher than those of other major exporters, limiting opportunities in price‑sensitive markets. Beef exports are projected to decline 8% in 2026. Elevated export prices continue to support producer returns but are reducing U.S. competitiveness in key international markets.

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.