Tight supplies support cattle prices, but market risk is rising

Cattle prices have continued to retreat from record highs reached earlier this year. While the seasonal influx of fall calves typically puts some downward pressure on prices, the magnitude and persistence of the recent decline suggest the market is experiencing more than a normal seasonal correction. National steer prices peaked in May, stabilized briefly in July and then entered a more sustained decline in late July. By September, prices had fallen below year-ago levels. Western markets have followed a similar pattern, although the timing has varied by state. In October, Montana was the last state in AgWest’s territory to fall below 2025 levels.

The pullback reflects a shift in market leverage, as weaker packer demand, processing-capacity concerns and increasing imports weigh on cattle prices. USDA cited lower-than-expected packer demand as a driver for lowering the Q3 and Q4 cattle price forecast. High cattle costs, combined with softer wholesale beef values, has pressured packer margins and reduced their willingness to bid aggressively for fed cattle.

Increasing beef imports and the gradual return of Mexican feeder cattle has eased some of the supply concerns that helped drive prices to record highs. More than 67,000 Mexican cattle have entered the U.S. since the first port reopened in August. Beef imports are also receiving additional access following the Sept. 1 implementation of an expanded tariff-rate quota for lean beef trimmings. While these developments have added pressure to the market, the physical supply impact remains relatively small compared with the historically tight domestic cattle inventory.

For AgWest cattle producers, the recent decline signals that the record-price environment is becoming more volatile, but fundamentals remain supportive. Tight cattle supplies should provide a price floor, but weaker packer demand, additional imports and greater feeder cattle availability could limit a return to this year's highs. Producers may benefit from protecting margins now rather than waiting, particularly as input costs remain elevated. The opportunity remains favorable for cow-calf producers with calves to market, but increased downside risk makes forward contracting and risk management strategies more important heading into 2027.

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.