I don’t think anyone expected cattle markets to get this good, especially during August. Fed cattle are trading as high as $250, and the August futures just kept moving higher. The beef cutout is at an all-time high at $413 and packers are making a few bucks. It’s crazy that everyone is making some money at these trading levels.
However, we usually get a shift in the market post Labor Day; it’s a seasonal thing. But with fewer fed cattle available, who knows what’s going to happen. The boys at HedgersEdge.com seem to think there will be larger front-end supplies—cattle on feed for more than 150 days—available for the balance of the year than there was in 2024. Then in 2026 the real low supplies start.
It’s remarkable that feeder cattle are trading at $350 and higher and the futures markets are supporting those levels. Southern Plains cattle feeders are starting to feel the effects of the screwworm episode in Mexico; that market has been closed for nine months or better and we usually import 1.2 million head a year. July placements were down 6.1% from a year ago, which would be the lowest July placements since 2016, the last big drought and herd liquidation. We’re starting to see $4 on 800-900-pound steers. Last year, the market broke after Labor Day, too.
Then there are those young calves trading at $6 for lightweight steers weighing 400 lbs., and we’ve seen plenty of 500-600-lb. calves sell between $4 and $5 a pound. We even saw some beef-on-dairy steers sell for over $7, weighing 350 lbs.
A lot of market watchers are starting to think that cow-calf guys will be starting to rebuild their herds. If you look at the drought map, there appears to be plenty of forage available in most of cow country. The Intermountain West and the Southwest remain dry, but they represent about 15% of the nation’s cow inventory.
Prices for bred cows and heifers have been great, but we usually see the big drafts of bred heifers in November and December. Prices for feeder heifers remain strong, but it will be important to watch placement patterns and the spread between steer and heifer calf prices. I’m afraid cattle feeders will remain aggressive buyers of feeder heifers while cow-calf guys will do it organically within their own herds. We’ll know more about heifer retention in the annual cattle inventory report in January.
The folks at the Cattle Report said recently, “Some might want to simplify the discovery of the market top by associating it with that point when cattle supplies have reached their low point. This would push the event out into the future as the full thrust of heifer retention is not expected for many months. The top rarely occurs when supplies are the shortest because market participants anticipate the event and take actions to counter the arrival. Futures prices also play an important role in anticipating future events and their price influences the price of replacement cattle so the top on replacement cattle rarely matches the point of shortest supply.”
Feed costs have become more reasonable; corn is trading below $4, and cattle feeders are able to put a pound of gain on these feeder cattle for under $1/lb. But, with what they are paying for replacements, they must have breakevens near $2.50/lb. or higher. Hay prices have also come down, which will help cow calf-producers’ wintering costs. And, could promote replacement retention.
It’s like we’re in the perfect storm. Cheap feed, high boxed beef prices, the absence of Mexican feeder cattle and the tariff threat, have all contributed to this market. Consumer beef demand has been outstanding. The average Choice retail price was $9.69 this past July and I expect August to be even higher. The industry is expected to produce 25.8 billion lbs. of beef this year, and forecasts are for 25.1 billion lbs. for 2026.
So, these markets will be with us for a while. Just wait until the holiday rib market starts, which should be in mid-October when packers start buying and stashing ribs and loins. We’ve never seen anything like this, and we all know it won’t last forever. Let’s pray for rain in the West. — PETE CROW
