Record high cattle market has yet to peak

The U.S. cattle market is at an all-time high and likely will not peak until at least 2027, according to Derrell Peel, Oklahoma State University (OSU) Extension livestock marketing specialist.

“Cattle markets are in an unprecedented situation,” Peel said at the recent Rural Economic Outlook Conference in Stillwater, Okla. “We have been at record levels most of this year for all classes of cattle, and we’re not at the top yet.”

Peel said he is still unsure how high prices will get. The cattle industry is closely monitoring factors such as heifer retention to determine where and when the market will top out and the herd begins to grow again. He also said the market is trying to incentivize herd rebuilding.

“Bigger herd numbers will eventually put a top on this market and lead to higher numbers or lower prices,” Peel said. “But we have not started definitive heifer retention yet, so we still have higher prices ahead of us.” 

Managing risk

Stocker producers or any producer above the cow/calf level work on margins involving some risk as they buy and sell. 

“Whether it’s a stocker calf, feeder animal or fed animal – all the way to the retail customer – margins are not as attractive,” Peel said. “These sectors face more challenges in this market. It’s a great time to be selling, but those who are buying are investing a lot of money and taking a lot of risk.”

With prices this high, markets become more volatile, Peel noted. Even with bullish prices, he explained producers should manage for market volatility. 

“They don’t sell on the annual average price,” he said. “They sell at specific points in time or a certain type of cattle. Anything can happen on any given day.”

External factors, for instance, cause market volatility and can hurt producers who get caught in a negative marketing window. Peel stressed the importance of producers having options to protect against this volatility.

Producers have access to many risk management tools, including the Livestock Risk Protection Insurance (LRP) option, which offers minimum price protection. 

“They can also hedge cattle on the futures market, but they should remember hedging is tough in a bull market because it limits both ways,” Peel said. “Options, which work much like LRP contracts, offer downside risk protection, but leave the upside open.”

Forward contracting offers another possibility. 

“Producers need to determine what alternatives are available and figure out what works best over the months ahead,” Peel said.

Politics

“Political turmoil in the U.S. and around the world brings volatility which affects cattle markets even though our fundamentals internally are solid,” Peel noted. 

Tariffs and trade wars also create turbulence and a lot of uncertainty. Peel said the market is starting to feel some effects of the conflict, and he expects it to intensify going forward.

“Trade is an important part of our market. Trade issues are external to the cattle industry, but they have an impact and we have to monitor them,” he said.

Peel also pointed out the U.S. cattle industry looks for market opportunities around the world. 

“The most important ones are well identified. The biggest issue we’ve seen with tariffs relates to China, but other major markets are also softer,” he said. “Exchange rates also factor in for exports and imports. We have to watch all of those things.” 

Imported beef plays a role in processing ground beef. 

“Dramatic decreases in domestic cow slaughter resulted in a ground beef market at the tightest level of all beef products,” Peel said. “Anything affecting imports affects these markets. Consumers, as well as producers, need to be aware of those impacts.”

Peel said the U.S. doesn’t import ground beef but buys lean trimmings from several markets – mainly Brazil and Australia in 2024.

“Because of the tariffs on Brazil, we expect to see market disruption, and supply will be limited,” Peel said. “We have bilateral trade with Canada and Mexico. New Zealand is another source of processing beef. All of those markets are being affected to various degrees by trade issues.”

Political conflict isn’t the only thing affecting global trade. The U.S. closed its border to Mexican cattle earlier in the year to prevent the spread of New World screwworm. This makes the tight feeder market even tighter, Peel said.

Complicated industry

Peel explained the U.S. cattle industry is both a complicated and a relatively simple story. 

“Supply – or lack of supply – is driving the train,” he said. “We will continue to have even tighter cattle supplies, at least for feeder cattle. Beef production will continue to fall through 2026 and probably 2027.”

Many issues pose opportunities and challenges for the beef industry. 

“But from a pure price standpoint, it looks like we will continue to be in a very strong price situation for the foreseeable future,” Peel concluded.

Ron Smith is a contributing writer for Farm Progress and Shelley E. Huguley is the senior editor of SouthwestFarm Press. This article was originally published by Southwest Farm Press on Oct. 28.