Record highs fade, but cattle fundamentals remain bullish

Cattle markets have retreated from the record highs reached earlier this year, but underlying fundamentals remain supportive. The pullback reflects a market moving off exceptional highs rather than a meaningful shift in outlook.

Feedlot inventories totaled 11.1 million head on Aug. 1, up 2% from a year earlier, as longer feeding periods and the gradual return of Mexican feeder cattle imports helped offset lower placements earlier in the year. Even so, beef production continues to run below previous expectations as slaughter rates remain historically low, prompting USDA to reduce its 2026 beef production forecast.

Cattle and beef imports are providing some relief to tight supplies, though uncertainty remains regarding their impact on the broader market. The reopening of the Douglas, Arizona, and Santa Teresa, New Mexico, crossings has improved confidence in feeder cattle flows, with more than 18,000 head entering the U.S. during the past six weeks. The crossings were previously closed due to concerns surrounding New World screwworm, a flesh-eating parasite first detected in the U.S. on June 3. Since then, cases have slowed markedly, declining from 31 detections in the first month to just four over the past month. All cases have remained confined to southern New Mexico and Texas. Although the situation has improved, the industry continues to monitor the pest closely, as a broader outbreak would pose a significant threat to U.S. cattle production.

Markets have also focused on the expanded 300,000-metric-ton tariff-rate quota for imported lean beef trimmings. Beginning Sept. 1, the first 100,000 metric tons became eligible to enter the U.S. at a reduced tariff rate, with the goal of increasing supplies used in ground beef production and easing retail beef prices. The initial tranche alone exceeds the 70,000-80,000 metric tons of lean beef trimmings typically imported. However, the market impact remains difficult to isolate. While cattle prices have eased from the record highs reached in May, it remains difficult to determine how much of the decline can be attributed to increased imports versus typical seasonal pressures. The fall calf run traditionally weighs on prices as large numbers of spring-born calves enter the market, although many contracted calves continue to command prices above $4.00 per cwt. Retail beef prices have shown little sign of meaningful relief. The market impact of expanded lean beef imports remains unclear and continues to be closely monitored by producers and industry analysts.

Demand remains one of the market's strongest pillars. Consumers have continued purchasing beef despite elevated retail prices, while historically low beef cow numbers and slow herd rebuilding continue to underpin the longer-term outlook. Competition from expanding pork and poultry production, along with growing beef imports, may create headwinds, but the broader market story remains unchanged: cattle supplies are tight, demand is resilient, and fundamentals continue to support the sector despite recent price consolidation.

Profitability

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

Strong fed cattle prices continue to offset elevated feeder cattle costs, although narrowing margins and softer cattle prices have reduced profitability from earlier highs. 

The outlook has turned more bearish over the next 12 months as calf prices have retreated from record highs and concerns grow over increased beef imports, higher feed costs, and growing uncertainty surrounding cattle prices and producer margins.