Global AgriTrends

07.17.26

Cattle Futures Tumble, What About Calves?

Negative sentiment has swept cattle futures and pressured cattle prices lower. There is a lot of noise in this market. And fear and uncertainty are often out the door before truth can get its boots on.

Here are my thoughts:

- The big news in the cattle and beef markets has been the sharp fall in cattle futures and lesser drops in cattle and cutout prices.

- August feeder cattle futures are down -8% from the June 25 high.

- Fed cattle are trading $7-8/cwt lower this week (-3% from last week and the highs), around the $248/cwt level. That will improve packer margins as these drops are outpacing the decline in beef cutouts. The drop in August live cattle futures since June 23rd eroded cattle-equivalent prices by roughly $20/cwt, or -$318 per head (-8%). During that same period the comprehensive beef cutout declined by roughly -$17/cwt, or $164 per head (-4%). Live cattle futures over-traded the actual drop in beef cutout value by 2x. Retail beef prices remain at epic highs.

- The drop in futures has prompted cries that the bull market has ended, and the cattle/beef price cycle is now turning lower. Caution warranted on that, as supplies remain tight and a rebuild has yet to occur. The only other explanation would be a collapse in beef demand which is difficult to determine and impossible to predict. Without a catalyst, this is unlikely. These price drops have been driven by sentiment, not supply nor demand in my opinion. Can market sentiment turn the market against fundamentals? Yes, but not forever. The tight supplies will have to now prove their way back and it may take a few months. After the flash-crash last November (after Trump’s Argentina comments), negative sentiment drove the market lower into February when tightening supplies forced a recovery. This time could be similar.

- Beef production is now down -5% YTD versus last year. Total cattle slaughter (fed cattle and cows) is now down -7% on a YTD basis versus last year.

- Dressed steer weights are now falling seasonally, currently at 961 pounds, still up 28 pounds from a year ago.

- 90% lean grinding beef prices are trading around $460/cwt this week, down from $466/cwt last week. Note that this price level is still extremely high on a historical basis. Larger supplies of Australian beef after their quota to China was triggered have widened their price discount to nearly $100/cwt below U.S. 90% lean prices.

- U.S. shipments and sales to China remain nil in spite of the announced market “opening” over a month ago. But note that short plate (key Asian item) prices have pushed to weekly highs for the year at the top of their historical range, currently at $701/cwt.

Bottom line: Cattle and Beef

The turn in cattle futures sentiment has been bigger than the declines in cattle and beef pricing. Cattle and beef prices falling -3% and -4% are not a crash in my opinion. But market sentiment is powerful and it can take time for fundamentals to force their way back into pricing.

The cattle cycle is not yet over. A herd rebuild has yet to occur and that is when cattle and beef prices post their highs. Barring some unknown demand crash (highly unlikely) I expect a return back near those cattle, beef, and future highs likely by next winter/spring.

Brett Stuart