Cattle Futures Rebound, but Record Prices Bring Record Risk

What Happened

Unprecedented high prices for live and feeder cattle markets this past fall gave way to a quick sell-off. After peaking in the upper $240 range, live cattle futures moved to nearly $200 in mere weeks. This significant price drop was a reminder of how quickly prices can change direction. What took nearly six months to gain was given back in six weeks. Since finding a bottom, however, cattle futures have continued an upward grind, retracing nearly all their losses. The same can be said for feeder cattle. USDA’s January cattle inventory report provided additional bullish fodder, indicating the herd has not expanded. All cattle and calves came in at 86,155,300 head. The 2025 figure was 86,474,200.

Why This Is Important

The market is at or near record-high prices, reflecting tight supply and strong demand. Therein lies the concern for cattle producers. Demand has seemingly held up despite record-high beef prices. For those buying feeders, the bet is that, not only will demand hold up, record futures prices will continue to be the norm for live cattle. Recent red-hot auction barn prices suggest deferred live cattle futures contracts are not high enough to provide profits. The bottom line is: Risk has never been higher for cattle producers, especially those paying record-high feeder cattle prices.

An additional risk for those buying feeder cattle is the cost of feed. Currently, ample world supplies are keeping feed prices in check. Corn prices have traded at or below the cost of production for the better part of three years. Low prices have created record demand. Adverse weather conditions could quickly rally prices, perhaps substantially, as demand surges. Speculative buying could be a big factor as well. Managed funds are always on the prowl for low-priced markets with potential to quickly come to life.