January 7, 2026
MARKETS
Show lists are larger this week as expected but packer inventories are also small with slaughter needs for a full week. Packers will begin to move around testing if steady prices will buy any of the low end or heavy weight offerings. Processing margins are deep in the red and packers are hoping to improve operating conditions later this month when the Tyson reductions are in place.
In the south last week, trades were based on a few cash trades at $231-$232 the broad bids at $232 were passed on Friday creating the need for packers to finish the week on Saturday morning purchasing cattle at +$1 and +$2 to a $232 base. This avoids the higher sales being reported by USDA. So long as USDA assists packers in setting sub par base prices, packers will be moving to “over the top” transactions. Most sales in the north last week were at $232 live and $360 dressed.
This past week’s New Year slaughter of 474,000 head was up 48,000 from the previous Christmas week and 31,000 under last year. The week also included another decline in the choice cutout that has been in a steady decline since November. The choice/select spread also narrowed to the smallest number of recent months at $3. Grading of cattle above the choice grade topped all time records. Seasonally the first quarter of each year is the narrowest choice/select spread of the year. Holiday shoppers found many more prime beef cuts on the meat counter this year.
Futures prices were higher continuing the upward direction. Retail interest has been good following two short slaughter weeks. Some hedged cattle owners are complaining about the basis as futures. Many of the fully hedge operations struggling with negative margins are finding a negative basis caused by USDA reporting failures to provide a base price under the real cash and therefore additional problems with the futures basis.
Benchmarking. On Tuesday of each week, USDA releases a weighted average price report for all cattle sold the previous week. The report summarizes the distributed price levels for each category of sale such as Negotiated/Formula/Forward Contracts. Beef producers are able to measure the marketing price for their cattle compared to the national averages.
The Comprehensive Fed Cattle Weekly Report offers the most current information on the current status of fed cattle being harvested. The report is published each Tuesday and includes the previous week’s change in carcass weights and quality grading. The latest report shows carcass weights at 954#, 4# higher than the prior week, and 35# heavier than last year. The combined steer and heifer weights can easily be influenced when the proportion of steers to heifers in the weekly slaughter changes. Quality grade was up 1.1% from the previous week at 87.3% — another all time record.
The Weekly Steer and Heifer Grading Report is indicative of regional supplies of choice and prime cattle and often is determinative of regional differences is live price. The report is also reflective of the current status of fed cattle offerings in each area.
Forward Cattle Contracts: Forward contracts will always bear some relationship to the corresponding futures month closest to the delivery month for the cattle. Basis levels will move up and down as processors want to add to forward contracts or not. The driver in forward purchases of cattle will always be forward sales of beef. Packers will always be willing to take a price risk off the producer’s plate in return for an extra margin.
The volatility in futures prices has caused more interest from cattle owners in forward contracting. During the past two to three years, fewer cattle have been forward sold as most producers anticipate higher prices in the future months. Some owners now are willing to set the price for future deliveries with basis levels to the futures varying by region. Large discounts in the deferred month usually discourages forward contracting.
Formula and Negotiated Grids. The Price and Distribution Report delineates the various selling methods and net results.
The Cattle Contracts Report details the percent of contracts by volume of cattle and by number of contracts for selling cattle. Formula selling that was once the largest marketing method and still is, but is losing ground to negotiated grids where the premiums and discounts are set but the base price is negotiated.
If beef demand should improve heading towards Christmas, the middle meats should provide support for the cutout. USDA Prime cuts are carving out a larger slice of the grocery offerings. Holidays provide an opportunity for many families to spurge on food purchases. Heavy carcasses also are changing the processing specifications for some cuts. Many of the rib cuts are now cutting off the lip to make the ribeye steaks smaller.
The Cutout. Box prices were softer. The choice/select spread continued to narrow as it does seasonally each year. Because of improved quality grade, more prime cuts will be on the shelf this coming year.
One casualty of the beef marketing efforts has been the highest end products. The Wagu and branded “all natural” specialty items often seen on the meat counter, but always carrying a heafty price tag. These include the USDA Prime cuts and have become more prevalent as quality grade on all cattle continues to break new records. It is not unusual to see packages carrying a discount sticker. They must be sold like all perishables, but unlike most perishables, the consumer experience eating the discounted cuts is not diminished.
Replacement markets
The feeder market is reopening and many feedlots are searching for available cattle but finding few and those offered are in strong hands and considered overpriced. Supply shortages have created intense competition for a small supply of cattle and all buyers are wary. Placement numbers are falling in some cases rapidly. Hopes for a positive outcome of ownership of new purchases are not high and most operations want to stay in the market but know they are overpaying for cattle. There is a new desperation driving new purchases of owning inventory at any price.
Occupancy levels are falling in all regions but especially in Texas. The whispers are getting louder about a port by port opening of the Mexican border to be announced soon. Certainly feeder futures have posted innumerable losses occasioned by the border opening rumors and once the reality is experienced, very little market impact will be noted. Many structural changes are occurring in Mexico as more ranchers opt to feed their own cattle in Mexico.
Empty pens are common spreading from south to north. Some operators would prefer to look at an empty pen to taking on the exposure by a new purchase of high priced cattle. Some bankers would agree. Those who do choose to place cattle on feed, must gamble with hard earned equity that future prices will rise well beyond the heavily discounted price witnessed on the futures board. Some consolidation of feeding capacity is expected in this new year.
The drought monitor continues to favor herd expansion. Some dryness has developed in the southern plains. Chances are good that the slow rebuilding of the nation’s cattle herd is now morphing into full throttle rebuilding and those forecasting recovery several years away will find it happening sooner rather than later.
Compared to the last sale in December: Feeder steers 3.00-10.00 higher. Feeder heifers 10.00-20.00 higher. Demand moderate to good for feeder cattle. Some 6 and 7 weight cattle of right flesh and kind are headed back to winter pasture. These sold sharply higher. Cattle futures closing higher today. Steer calves 15.00-25.00 higher. Heifer calves under 500 lbs mostly steady; over 500 lbs 20.00 higher. Demand very good for calves despite very dry conditions. Rain is in the forecast for later in the week. Much of the state has returned to some stage of a drought and some wheat is starting to yellow due to the lack of rain. Quality average to attractive. Supply included: 100% Feeder Cattle (59% Steers, 38% Heifers, 3% Bulls). Feeder cattle supply over 600 lbs was 53%
Compared to last sale: Steer calves 25.00-35.00 higher, except 500-600lbs 8.00-16.00 higher. Heifer calves 15.00-25.00 higher. Demand extremely good as multiple buyers bid on almost every draft. Early in the sale, buyers were more selective; however, as the sale progressed, unweaned cattle began bringing higher dollars as buyers became aggressive on nearly everything that came through the ring. Dry conditions
did not dampen buyer spirits. As many wheat producers noted, despite the lack of moisture, wheat conditions continued to look good. A rain of any kind would bring renewed optimism and could push the market to all-time high prices. Supply included: 100% Feeder Cattle (46% Steers, 46% Heifers, 8% Bulls). Feeder cattle supply over 600 lbs was 25%
Feeder Cattle Futures. Futures prices were higher as the holiday period has only exaggerated the short supply of replacement cattle. Public auctions confirmed strong demand for replacement cattle.
The lack of liquidity in the feeder contract provides a perfect environment for prices to move too far in either direction. Poor liquidity leads to extreme volatility. Overdone directional price movements frequently require corrections and traders sense the vulnerability of the contract that needs to be cash settled but the contract index needs a redo.
Feeder Cattle Cash Index. The index is tracking the moves in cash prices.
Video and Internet Replacement Cattle Auctions. The movement from traditional private treaty sales to Internet auctions has been slow but steady. Producers have chosen this option as the primary marketing tool for most of the cattle offered in the replacement markets. The market that was once dominated by one firm has seen new competition from multiple trade platforms.
National Weekly Feeder Summary released on Friday of each week tracks the national prices by region for last week.
Grain Futures. Corn prices were moving sideways. Corn basis levels in Guymon, Oklahoma are at +$.50 — basis the March contract.
TRENDING IN 2026
The live sector of beef production can now look back on what may be the best year ever for beef producers. Record prices, record carcass weights, record profits, and generally beneficial rainfall across most of the nation, contributed to the type of year any business would envy. Unfortunately, the view for 2026 lacks the optimism of 2025 and many express dark fears of things to come. Margins will be threatened and uncertainties will become commonplace.
January will begin with consolidation in the processing sector as beef packers adjust to a smaller fed cattle supply. The closure of the Tyson plant and downsizing of another will create operating efficiencies for the remaining plants but also will improve trade leverage for the remaining plants. The same pressures on processing facilities will move to feedlots and one can expect some of the larger feeding companies to shut down one or more feedlots and consolidate numbers in the remaining feedyards as margin pressures force the change.
As the number of cattle in the daily slaughter continues to decline, fewer sales prices will be available in the cash markets. The numbers of committed cattle will rise, as a percentage of all slaughter cattle, leaving little room for cash trades to find their way into price discovery. The refusal of USDA to reformat mandatory price reporting services to accommodate industry changes, will force more transactions to move away from government reporting services to seek out private reporting services for finding a base prices. USDA might choose to shut down price reporting or contract out the work.
This new year might see a larger cow slaughter as breeders resume more normalized culling programs. Beef imports will rise and exports will fall as can be expected in a year struggling with short supplies and high prices. Import increases will help supplement demands for the grind — where over half of all produced beef is sold. Price pressures will be concentrated in the middle meats where domestic sources will be in short supply.
Hanging over the entire live sector will be the struggle to recover operating costs from the negotiated sales price. The swap rate is poor with each pens sold, the next replacement purchase will require a higher breakeven. If a $250 fed cattle price is not sustainable then the entire live sector will struggle with margins. Despite record prices for calves, breeders will be squeezed to make high priced replacement heifers produce a profitable calf. Stocker operations requiring $350 for an 800# steer will be challenged.
The vulnerability to political attack will always be present as beef remains a poster child for inflation. If retail prices push to another higher level from current prices, they may find consumer resistance. More pressures will be placed on the industry to recognize the need for mandatory ID of all cattle that can deliver production and animal health efficiencies necessary to bridge the gap to an adequately sized and restored national cattle herd.
USDA CONTACT FOR CORRECTING MANDATORY PRICE REPORTING
mpr.lpgmn@usda.gov
This email address is used for comments for Livestock Mandatory Price Reporting (LMPR). You can also leave a voicemail at 202-720-1990 if needed.
CATTLE REPORT LIBRARY
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NOTE TO READERS
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EXPLANATIONS OF BREAKEVEN/CLOSE OUT TABLES
Regional differences in grain and cattle basises create a difficulty in modeling a national composite for current close outs or a proforma forward look at a breakeven. Readers should consider your own area for adjustments to these models. Most calculations are basis relevant prices in Guymon, Oklahoma.
CURRENT BREAKEVEN PROJECTION
The Cattle Report introduces the FEEDER METER. The report estimates profit or loss for currently purchased feeder steers and projects a result 180 days out. The chart is interactive and updated every 15 minutes in real time based on changes in futures markets in grain and cattle. Corn basis information is based on current trade prices adjusted every two weeks. Feeder prices are based on the USDA index price for 800# steers and fed cattle sales are $2 cwt. premium the appropriate futures contract.
CURRENT CLOSE OUT
The Cattle Report estimates current profit or loss on cattle placed on feed 180 days ago. This report generated from industry averages attempts to simulate a typical close out based on the feeder index for 800# steers 180 days ago. The close out assumes grain was purchased at market each month. Selling prices and interest rates are based on prevailing benchmark quoted prices. This chart will change weekly.
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