Cattle Market Retraces losses. Now what?
What’s 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, futures moved to nearly $200 in mere weeks. This significant price drop was a reminder as to just 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. Providing additional bullish fodder was January’s Cattle Inventory report which, in a nutshell, indicated 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. Red hot auction barn prices in recent weeks suggest deferred live cattle futures contracts are not high enough to provide profits. The bottom line is that the risk has never been higher for cattle producers, especially those who are paying record–high feeder cattle prices.
An additional risk for those buying feeder cattle is the cost of feed. Currently ample world supplies due in part to a record 2025 and 2026 U.S. corn crop 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 to cover needs. Speculative buying could be a big factor as well. Managed funds are always on the prowl for markets that are low–priced with potential to quickly come to life.
What can you do about it?
Keep a sharp marketing pencil at hand. Cattle producers are, by nature, risk-takers. Yet, it doesn’t take a vivid imagination to see a quick price decline. Last fall there was a preview to how quickly a price trend can change. Cattle prices could rapidly drop, eroding mostly positive revenue over the last 18 months. Explore all avenues to defend cattle and feeder cattle prices. In addition, don’t assume cheap grain will just “be there.” Lock in longer-term needs on price setbacks with cash contracts. If that is not available to you, consider futures or call options to defend against higher prices.
Cattle producers love what they do. It is in their blood. Unfortunately, history also suggests they tend to keep doing what they love until they lose money. Risk is the norm, yet the stakes may be higher now than ever before. Now is the time to step up and take marketing to the next level by executing a strategic approach to managing risk and opportunities.
Find out what works for you…
Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally–charged responses to market moves, which are always dynamic.
About the Author: With the wisdom of over 36 years at Total Farm Marketing and following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of Brokerage Solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the markets and marketing tools, a strong listener, and communicates with intent and clarity to ensure clients are comfortable with their decisions.
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.
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Bryan Doherty