THE wholesale beef market ended 2025 with an uncharacteristically weak undertone. Cutout values fell throughout December despite reduced slaughter and production levels. The comprehensive cutout declined by $15.71 per cwt in the four weeks to December 26. So the market will be hoping that January brings better prices, before the weakest two demand months of the year begin in February. Further weakness in cutout values will put pressure on live cattle prices even if supplies of market-ready cattle remain tight.
One positive for the beef complex as 2026 begins is that Americans continue to purchase all cuts of beef despite the record high retail beef prices that topped out last October. Consumers seem unconcerned about the prices, in large part because they see the value equation. The realize that prices are high but they are receiving even better quality beef than ever before, say analysts. Latest average Choice retail beef prices in November declined slightly from October’s record high but USDA’s All Fresh beef price put in a new record. Both were far above last year’s prices. The Choice price averaged $10.08 per lb, versus $10.11 per lb in October and $8.32 per lb last year, a gain of 21.2%. The All Fresh beef price averaged $9.40 per lb, up from $9.38 per lb in October and up 16.6% from last year’s $8.06 per lb.
However, this percentage increase was well below the increases seen in the live cattle prices, says Andrew Gottschalk, HedgersEdge.com. Both packer and retail margins remain below their respective break-even levels, given these higher input costs, he says. In contrast to the beef prices, the retail pork price in November averaged $4.93 per lb, down from $5.02 per lb in October and $4.95 per lb in November last year. The average chicken price was $2.04 per lb, down a penny from October and down four cents from November last year.
Demand May Show Weakness
With holiday buying in the rear view mirror, the concern is that beef demand may show further weakness and that this may continue as Christmas shopping bills come due, says Gottschalk. Given the short production schedule last week on the heels of the holiday-shortened production the prior week, one should expect the cutout to gain some traction and advance through the first ten days of the New Year. But holiday beef buying is fading in the rearview mirror and the road ahead reads Caution” for beef demand, he says. The comprehensive cutout the week before last averaged $354.52 per cwt. The Choice cutout averaged $350.62, while the Select cutout averaged $340.61 per cwt, down $5.11 per cwt. Formula-priced sales accounted for 60.0% of the total volume of 5255 loads. Spot market sales accounted for 24.3%, forward sales accounted for 15.6% and export sales accounted for 11.8%. The Choice cutout the first three days last week declined by $3.76 per cwt.
Cash live cattle prices that week averaged $229.33 per cwt live or $356.53 per cwt dressed. These were up $1.36 per cwt and down $0.59 per cwt, respectively, from the prior week. The only trade of note last Tuesday was of 825 head in Kansas at $229 per cwt live. The primary concern moving forward for the cattle markets remains with the demand side of the price equation, says Gottschalk. Although front-end fed cattle supplies remain large, it is demand which will likely determine the direction of the market going forward. All-time high retail beef prices and ever-widening price ratios and differences for beef over the competing meats mean the latter is often the more enticing option for consumers, he says.
NOV PLACEMENTS WERE RECORD LOW
PLACEMENTS of cattle into feedlots in November were record low for the month for the second month in a row. USDA’s latest Cattle on Feed (COF) report showed that placements totaled 1.595M head, down 11.2% on November 2024. November marketings totaled 1.521M head, down 11.8% from the prior year. This was the second lowest November marketing total on record, only ahead of 2014, says Andrew Gottschalk HedgersEdge.com. The November total was 282,000 head below the five-year average and 204,000 head below last year.
The marketing rate (marketings versus the COF total) was record low for November and the second lowest of all time, only ahead of April 2020, the first month of the pandemic, says Gottschalk. This meant that the December 1 COF total of 11.727 million head was down 2.1% or 255,000 head from December 2024 and was 215,000 head below the five-year average. This would be the second lowest November total since 2017, he says.
Six states, Idaho up 5%, Iowa up 6%, Kansas up 1%, Nebraska up 3%, South Dakota up 9% and Washington up 13%, had more cattle on feed than a year ago. Nebraska had the most cattle on feed with 2.670M head, with its total up 70,000 head from a year ago. Texas was second with 2.610M head, down 270,000 head, and Kansas was third with 2.440M head, up 20,000 head. Three states placed more cattle in November than last year. California placed 12% more, South Dakota placed 4% more and Washington placed 15% more. Only Idaho (up 2%) marketed more cattle in November than last year.
Regarding placement weights, all categories saw year-on-year declines. The under 600 lb category saw 60,000 fewer cattle placed than last year (435,000 head). The 600-699 lb category saw 45,000 fewer cattle placed (375,000 head). The 700-799 lb category saw 55,000 fewer cattle placed (320,000 head). The 800-899 lb category saw 21,000 fewer placed (255,000 head). The 900-999 lb category saw 15,000 fewer cattle placed (130,000 head) and the 1000 lbs plus category saw 5000 fewer cattle placed (80,000 head).
Front-End Will Remain Above Prior Year
With lower than expected fed cattle marketings, front-end fed cattle supplies may remain above the prior year levels all the way through the first half of this year, says Gottschalk. He forecasts the January 1 total to be up 24% on a year earlier, the February 1 total to be up 20%, the March 1 total to be up 13%, the April 1 total to be up 7%, the May 1 total to be up 5% and the June 1 total to be up 4%. Currently the projection for April 2026 is that cattle on feed 150 plus days will be record large for any month in any year, he says.
The economics of adding weight to current inventories on feed is too enticing to pass up, especially when considering the cost of replacement cattle, says Gottschalk. It is unlikely that packers will apply any significant discounts that previously would have helped to prevent what had been considered overweight cattle. The significant improvement in the genetics of cattle today allows for the secular trend resulting in heavier carcasses to continue unabated. This is not to suggest that the improved genetics seen in cattle of today eliminates entirely the potential to overfeed, he says. Generally if the selling price of fed cattle exceeds the cost of gain, the green light is given to add additional pounds, and that is certainly the situation which prevails today. Thus, producers are only responding to the economic signals provided, as a free market should allow to have happen. As economic signals change, so too will feeding patterns, he says.
The central question for feeder cattle and calf prices is whether the cyclical high has been achieved, says Gottschalk. Why is also a pertinent question and one more complicated to resolve. The cycle to date has differed from the previous cycle in 2014-2015 when cow and heifer slaughter collapsed simultaneously. During the current liquidation cycle, cow slaughter has declined sharply while heifer slaughter set back little until last year in regards to herd reduction. As such, heifer retention is likely to accelerate from these levels, says Gottschalk.
In contrast, the drop in annual cow slaughter is expected to decline from the high levels witnessed during 2023 through 2025, says Gottschalk. During this period, total cow slaughter declined by an estimated 2.1M head. Heifer retention should accelerate while the declining cow slaughter rate moderates. Such action should allow for cattle prices to soften any blow seen from herd expansion. The greatest risk to domestic feeder cattle and calf prices, however, will be the timing of and the degree of increase of potential feeder cattle imports from Mexico. This continues to over-hang the market and threaten the nature and level and accuracy of any price estimates for this year. Imports from Mexico in mid-December were down 999,200 head from 2024, he says.
HERD REBUILDING IS TOO EXPENSIVE
LANCE Zimmerman, Rabobank’s senior beef analyst for the North American market, offers his explanation for the lack of expansion of the U.S. beef herd. Over the last 30 days, he has received more calls and messages from clients, industry leaders and media regarding heifer retention and cow costs than perhaps he had received the entire preceding 11 months, he wrote in mid-December. His suspicion is that many want to better understand producer motivations behind beef cow herd rebuilding, and how they might be different than ten years ago, he wrote.
The simple explanation is herd liquidation stopped in 2024 and 2025 doubled down on that effort, he wrote. The beef cow culling rate for 2025 is going to average near 8.5%, which would be the lowest since 2015. However, heifer retention remains lackluster based on all the standard heifer-mix metrics. In his opinion, the industry will see a 3% to 4% increase (200,000 head) increase in beef replacement heifer inventories on January 1, 2026, as in USDA’s Cattle Inventory report. That will be disappointing to many, even though it would be comparable to the year-over-year increase from 2013 to 2014 during the last cattle cycle’s rebuilding phase. With bred replacement heifer prices on top of $4000 per head on a U.S. average basis today, this herd rebuilding effort has simply become too expensive for many cow-calf operations to participate, he wrote.
Only 5% of beef cow-calf operations have 200 or more cows, and the average herd size is around 45 head, wrote Zimmerman. When you look at the Census of Agriculture data, only the 200 plus cow-calf operations grew cow numbers over the last 25 years. Today, more than ever before, only the bigger cow-calf operations are experiencing meaningful growth. He would double down by saying that the larger operations that are growing today are increasingly leaning on a younger management team, he wrote.
These younger operators have a stronger risk appetite to add those breeding females today, and they are more likely to have the per head or per acre margin mentality necessary to thrive as a cattle producer in the volatile U.S. beef industry today, wrote Zimmerman. These operations are getting the most out of new herd additions with exceptional data management, technology adoption, risk management and marketing savvy. As a result, he believes the U.S. cow-calf business is going to become much more structured in its management approach and reflect a more margin-focused business like its cattle producing peers in the stocker, backgrounder and cattle feeding segments going forward, he wrote.
There is a great research article from December 1 published by the University of Nebraska, wrote Zimmerman. The article highlighted the profit potential of replacement heifers based on purchase price, operational cost structure and breeding herd culling rate. It is an exhaustive sensitivity analysis, and the bottom-line summary is that $4000 plus per head replacement heifers are not going to be profitable for nearly all operations without significantly higher cattle prices going forward.
That said, his estimate suggests the cost to develop a fall 2025 ranch-raised, weaned heifer calf into a bred replacement heifer by the early 2027 calving season is around $2000 per head, and he likes the potential for high-quality, home-raised heifers to be profitable for farmers and ranchers. The challenge for most is giving up a near certain $800 to $1000 per head profit on that weaned heifer calf today when for many, the mixed enterprise operations the grain-producing segment of the farm was closer to a breakeven effort, he wrote.
SCIENTISTS FIND NEW BSE SOURCE
SCIENTISTS for decades have believed that bovine spongiform encephalopathy (BSE) in cattle is caused by either ingesting nervous system material from by-products from infected animals, or via a rare spontaneous form. But new research out of the University of Alberta in Canada is throwing light on other possible sources of infection, says Beef Central. The recent research challenges the belief that BSE is caused only by misfolded proteins. This is a discovery that sheds new light on the devastating outbreak in the UK 40 years ago and provides new hope for prevention, says Beef Central.
The study, published in the International Journal of Molecular Sciences, shows for the first time that such prion-like brain diseases can be triggered without the presence of infectious prions. Prion disease occurs when normal proteins in the brain misfold into infectious, abnormal proteins. Instead, chronic inflammation caused by a powerful bacterial endotoxin called lipopolysaccharide (LPS) was identified as a culprit that can independently trigger brain damage resembling prion disease.
This fundamentally challenges the prevailing theory that these types of brain diseases are only about prions or similar misfolded proteins, says Burim Ametaj, a nutritional immunobiologist in the Faculty of Agricultural, Life & Environmental Sciences and lead author of the study. The research revealed more of a multi-faceted process behind that neurodegeneration, showing that inflammation weakens the brain’s defenses first, overwhelming cells. Proteins could then start misfolding and the immune system over-reacts, causing more damage.
All three processes feed into each other, which means scientists need to target inflammation and immune health, not just the misfolded proteins, says Ametaj. The discovery suggests that endotoxins in the animal-derived feed offered to cattle may have contributed to the BSE crisis in the UK, he says. The outbreaks devastated the livestock industry in the 1980s and 1990s, resulting in the deaths of 160 people who had eaten infected beef, and the slaughter of more than four million cattle.
LPS Alone Caused BSE
The study provided striking evidence that LPS alone, administered under the skin, caused spongiform brain symptoms in 40% of mouse models, a holey appearance in the tissues as seen in BSE and related diseases. When LPS was combined with lab-created misfolded proteins, that number rose to 50%. In both scenarios, this Alzheimer-like damage happened even when the naturally occurring infectious prion responsible for BSE was absent. The research also showed that when a prion disease such as BSE is present, inflammation caused by LPS dramatically worsened damage to the brain, resulting in 100% mortality within 200 days of infection.
The new findings could offer insight into why there were many more BSE cases in England and Wales than in Scotland, based on the procedures rendering plants used to make livestock feed, says Ametaj. Rendering plants in England and Wales removed a critical substance called hexane from the production process to cut costs. This solvent was essential not only for fat extraction but also for dissolving and removing LPS from the meat-and-bone meal. In contrast, Scottish rendering plants retained the hexane step and potentially because of that, had markedly fewer BSE cases, a fact long known but never systematically explained, he says.
The study measured LPS in meat-and-bone meal, the feed implicated in BSE-blood meal and tallow, and confirmed high levels of contamination. Combined with chronic exposure to such feed, predisposing conditions in dairy cows induced by high-grain diets immediately postpartum, and by an increased “leaky gut,” can trigger systemic inflammation and could contribute to the development of neurodegenerative disease, This suggests that excluding the hexane step left contaminated feed that could independently trigger neuro-degeneration, explaining why the BSE epidemic followed the geographic pattern it did, he says.