Political risk overshadows fundamentals

Left to their own devices, bullish supply and demand fundamentals continue for beef markets. Unfortunately, the federal government continues inserting itself into the marketplace, in the name of lowering consumer retail beef prices. 

“What is clear is that uncertainty and volatility from political comments and rhetoric have a very real negative impact on producers and consumers,” according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. He noted in his early-November market comments that feeder cattle value declined $200-$300 per head in Oklahoma auctions the previous week.  

For broader perspective, the CME Feeder Cattle index declined $33.21/cwt. from Oct. 15 to Nov. 14. During the same period, January feeder cattle futures were $57.30 lower; February live cattle futures were down $29.22.

Analysts with the Livestock Marketing Information Center (LMIC) provided perspective on declining cash calf values, in a recent Livestock Monitor. They noted Oct. 17 was the recent price peak for Medium and Large #1 steers weighing 500-600 lbs. in many market areas.

At the time, prices were $487.60/cwt. in Montana, $509.91 in South Dakota, $496.64 in Nebraska and $461.78 in the Southern Plains (Oklahoma and Kansas).

Just two weeks later, LMIC analysts say prices were 9.1% to 12.6% lower in these areas at $426.25 in Montana, $462.35 in South Dakota, $451.50 in Nebraska and $406.71 in Oklahoma and Kansas. Still, they point out prices in these market areas last week were 31.7% to 44.4% higher year over year.

On the other side of the scale, analysts with USDA’s Economic Research Service (ERS) shaved expected five-area direct fed steer prices for the remainder of this and next year, in the November World Agricultural Supply and Demand Estimates (WASDE), compared to the previous report, which was in September.

Projected prices declined $10 in the fourth quarter of this year to $234/cwt., for  an annual 2025 average of $225.97, which was $2.59 less. Prices were forecast $5 lower in the first quarter of 2026 at $242 and $3 lower in the second quarter at $245, for an annual average of $246, which was $3 less than the previous estimate.

That was with total beef production for this year at 25.76 billion pounds which was 70 million pounds less (-0.3%) than the September forecast. The total would be 1.2 billion pounds less (-4.6%) than last year’s total.

“The federal government’s demonstrated willingness to meddle in cattle and beef markets and interfere with markets doing what they do so well likely means that the industry will continue to deal with debilitating uncertainty and volatility,” Peel said. “The most likely outcome is that it will keep cattle producers and lenders cautious and further delay the lengthy process of herd rebuilding, which already looks to extend nearly to the end of the decade.” He added that the trajectory and price expectations for the next two to four years have not changed.

Tight supplies continue

While cattle market psychology may have shifted in recent weeks, market fundamentals remain mostly the same, says Will Secor, Extension Livestock Economist at the University of Georgia, in the latest issue of In the Cattle Markets.

“The supply side remains tight with limited opportunities to expand in the short run,” Secor explains. “Cull cows from the dairy sector may offset some of the reduction in beef cull cows on tighter dairy margins. However, this offset is partial. Additionally, dressed weight increases may be topping out. In September, year-over-year increases in cattle dressed weights ranged from 1.5-2.1%. In contrast, dressed weights in January saw year-over-year increases of around 3.2-5.3%. Lastly, changes in beef imports are limited and likely more complementary to existing beef supplies, as imports are often lean beef being blended for ground beef.”

USDA’s November Cattle on Feed report underscored the declining number of cattle available for beef production. Feedlots with 1,000 head or more capacity placed 2.0 million head in October, which was 227,000 head fewer (-10.0%) than a year earlier. Marketings in October of 1.7 million head were 148,000 head fewer (-8.0%). Cattle on Feed Nov. 1 of 11.7 million head was 260,000 head fewer (-2.2%), year over year. 

Continued closure of the U.S. border to Mexican cattle imports, due to New World screwworm, compounds declining cattle numbers.

Mexican cattle imports averaged 1.2 million head per year from 2004 to 2023, ranging from 0.7 million to 1.5 million head, according to Peel, in his mid-November market comments. He added these imports equated to 3.3% of the U.S. calf crop.

“There are indications that Mexican feedlots have been placing Mexican cattle (substantially devalued relative to the U.S. market) in lieu of Central American cattle that typically backfill the Mexican cattle supply,” Peel said. “… On net, it seems likely that perhaps 200,000 to 400,000 thousand head of Mexican cattle may currently be available for export.”

When the border opens to Mexican cattle imports, Peel says it will likely begin slowly.

In the meantime, tight supplies and overcapacity caught up to one of the nation’s major beef packers.

Tyson Foods announced the closure of its beef processing plant in Lexington, Neb., as part of its plan, “… to right size its beef business and position it for long-term success,” according to a company statement. Tyson also announced it will convert its Amarillo plant to one full-capacity shift and increase production at other company beef facilities.

Beef exports decline

Beef exports were sharply lower in August year over year ago, according to data recently released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

August beef exports totaled 83,388 metric tons (mt), down 19% from a year ago and the lowest since June 2020, impacted heavily by an impasse with China that has effectively locked U.S. beef out of the world’s largest import market. Export value fell 18% to $695.5 million, the lowest since February 2021. 

For January through August, beef exports were 9.5% below last year at 775,188 mt, while value declined 9% to $6.37 billion.

Beef export value equated to $372.10 per head of fed slaughter in August, down 5% from a year ago. The January-August average was $400.16 per head, down 3.5% from the same period last year.