Fundamental cattle market strength continues

Volatility continues to roil cattle markets, pushed and shoved during the last month by a wide range of factors. Examples include packing plant strikes — both real and rumored — the Department of Justice investigation into beef packers, the ongoing White House rhetoric about the need to lower consumer beef prices and of course, the arrival of New World screwworm in the United States. 

Increased feedlot placements for the first time in a long spell also added pressure. Feedlots with 1,000 head or more capacity placed 1.7. million head in April, which was 89,000 head more (5.5%) year over year, according to the USDA’s May Cattle on Feed report. That was about 1% more than pre-report estimates. Although the specific numbers were in question, most anticipated an increase due to drought-driven earlier placements, as well as the fact this is the first year-over-year comparison without Mexican feeder cattle imports for both years. Cattle of feed May 1 of 11.6 million head were 208,000 more (1.8%) year over year. 

Feed Cattle futures contracts declined about $20 from the first week of May through the first week of June, as did the CME Feeder Cattle Index. However, cash cattle and beef prices remain near historic highs, supported by both supply and demand fundamentals.

Herd expansion further delayed

Bernt Nelson, economist with the American Farm Bureau Federation provided perspective in the mid-May issue of In the Cattle Markets from the Livestock Marketing Information Center, pointing to cattle supplies at a 75-year low, strong consumer beef demand, drought across key cow-calf states and the fact that herd rebuilding takes two years from the time a heifer calf is born until it can have a calf of its own and create meaningful herd expansion.

“Herd rebuilding decisions continue to be clouded by ongoing challenges, including persistent drought, elevated input costs and animal health risks such as NWS,” Nelson says. “These factors are likely to keep production risks elevated even while beef demand remains strong, suggesting continued volatility in the cattle market in the months ahead.”

As folks ponder the shape and timing of herd expansion, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University says the combination of heifer and cow slaughter is the key indicator.

“The female slaughter percentage peaked most recently in 2023 at 51.8% (the highest level since 1985) and has decreased to the current level of 48.8%,” Peel says in his early-June market comments. “Female cattle slaughter is still above the average level. Most of the decrease observed thus far in the female slaughter percentage is due to decreased beef cow slaughter. Further decreases will depend on increased heifer retention (i.e. reduced heifer slaughter).” 

More specifically, Peel says 47% female slaughter is commonly regarded as the threshold for herd expansion. He believes it could take another 6-10 months for female slaughter to decline to that level.

“The initial stages of this process mean that cattle slaughter and beef production will continue to decline and that the highest cattle prices of this cycle are still ahead,” Peel says.

Higher cattle prices projected

USDA’s Economic Research Service (ERS) boosted expected feeder steer prices for the remainder of this year, in the May Livestock, Dairy and Poultry Outlook, based on recent data and tight calf supplies.

Compared to the previous month, projected prices for Medium and Large #1 steers selling at Oklahoma City, increased $13 in the third quarter to $380/cwt. and $15 in the fourth quarter to $384. The annual average price increased $10 to $377.22.

“Cattle prices in 2027 are expected to be modestly higher than the records currently forecast for 2026,” ERS analysts say. “This is based on a smaller anticipated calf crop in 2026 and more heifers retained for breeding to further tighten supplies available for placement in feedlots and for slaughter in 2027. The forecast for feeder steers weighing 750–800 pounds at the Oklahoma National Stockyards is $382/cwt, a 1% increase from 2026.”

Based on inventories at the beginning of this year, ERS analysts explain producers retained more heifers for their breeding herds year over year.

“An overall small calf crop and increased heifer retention for breeding will further constrict calf supplies available for placement in feedlots in late 2026 and the first half of 2027. This supports fewer feedlot cattle marketed for slaughter in 2027,” ERS analysts say. “In 2027, cow slaughter is also expected to decline as producers are anticipated to favor beef cow retention over culling from historically low beef cow inventories. This situation also supports a lower beef production forecast in 2027.”

The ERS increased projected five-area direct FOB live fed steer prices for this year, in the May World Agricultural Supply and Demand Estimates (WASDE), based on recent data and tighter expected supplies. Compared to the previous month, prices were forecast $10 higher in the third and fourth quarters at $252/cwt. and $255, respectively. The projected annual average price increased by $8 to $249.66. 

That was with beef production this year estimated 243 million pounds less (-0.9%) than the previous month at 25.5 billion pounds. The total would be 456 million pounds less (-1.8%) than last year.

Consumer beef demand unphased

U.S. consumers continue to pay increasingly more for beef.

The retail all fresh beef demand index of 147 for the first quarter of 2026 was 7% higher year over year and the highest since the data series began in 2000, according to the Livestock Marketing Information Center (LMIC), in the late-May Livestock Monitor.

“As the beef demand index reached a high for the series, the first-quarter all fresh retail beef prices were a record at $9.55 per pound, up $1.25 per pound (+15%) from the first quarter of 2025,” say LMIC analysts. 

U.S. beef exports also may receive a boost with China restoring market access for U.S. beef by renewing expired listings of more than 400 U.S. beef facilities and adding new listings, according to a White House Fact Sheet following trade talks between the two nations last month.   

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