BEEF processing margins turned negative in mid-December and have worsened since then. The margin the week before last was a negative $260.85 per head, according to HedgersEdge.com. The margin last week looked like being only slightly smaller than that. The result is that fed beef processors are reducing their daily and weekly slaughter levels despite two weeks of holiday-shortened production. These holiday weeks failed to allow boxed beef cutout values to increase. In fact, they did the opposite. The comprehensive cutout the week before last declined by a massive $12.37 per cwt from the week before. Despite this, cash live cattle prices advanced from the prior week, thus putting even more pressure on packer margins.
The comprehensive cutout the week before last averaged $342.15 per cwt, versus $354.52 per cwt the prior week. The Choice cutout averaged $336.42 per cwt, versus $350.62, while the Select cutout averaged $335.76, versus $340.61 per cwt. Formula-priced sales accounted for 61.5% of the total volume of 6007 loads, exceeding the 60.0% of the prior week. Spot market sales accounted for 28.9%, forward sales accounted for 9.7% and export sales accounted for 7.9%. Cash live cattle prices that week averaged $231.68 per cwt live, up $2.35 per cwt from the prior week. Dressed prices averaged $359.86 per cwt, up $3.33 per cwt from the prior week. The Choice cutout the first four days last week see-sawed but increased by $6.82 per cwt to $356.79 per cwt. A light cash cattle trade Thursday morning up north saw prices at $231 per cwt live or $365 per cwt dressed.
Cutout Rebound Stalled
The rebound in the beef cutout values last Monday stalled quickly on Tuesday, wrote Bob Wilson of HedgersEdge.com on Wednesday morning (Editor’s note: They rallied Tuesday, Wednesday and Thursday). The Choice-Select price spread last Monday of only $2.20 per cwt posted a difference on a daily basis of nearly par, he says. While this level might suggest there would be support for the product market, beef cutout values can continue to slip in conjunction with one another while the spread stabilizes or even widens, he says.
The pork cutout likewise is experiencing price pressure following the holidays, posting a drop of more than $3 per cwt last Tuesday, says Wilson. Good retail features were expected last week for ground beef, as retailers played into weaker discretionary spending from consumers. The demand side of the equation still has the potential to be the monster under the bed for the beef market and the cattle complex. It is demand for beef and/or the possible development of adverse feeding conditions which will likely determine the direction and price level of the market going beyond the first half of January, he says.
Wilson also notes that cow slaughter in 2025 was each and every week below the level seen the previous year, which he called a rarity. The weekly decline averaged 11,180 head. Moving through 2026, cow harvest is still expected to be below the total levels for 2025, although they most likely will not be down for each and every week. The front-end loading of marketable supplies of fed cattle has not ended as 2026 begins, he says. This category of cattle looks to be well above prior year levels through the first quarter and into the second. Carcass weights meanwhile remain below their record levels set in November. The December 29 week showed that steer weights averaged 982 lbs, flat with the week before but up 26 lbs on the same week last year. Heifer weights averaged 894 lbs, up 5 lbs from the week before and up 26 lbs on the same week last year. Overall weights averaged 894 lbs, up 1 lb from the week before and up 20 lbs on the same week last year.
IMPACT OF LEXINGTON CLOSURE WILL BE $3.28 BILLION
THE closure of Tyson Foods’ Lexington, Neb., beef plant, will have an annual statewide economic impact of $3.28 billion. That’s according to an analysis by the University of Nebraska-Lincoln (UNL). Tyson will close the plant on January 20 after announcing its closure on November 21, 2025. It also plans to cut back operations at its Amarillo, Texas, facility to a single full-capacity shift. The Lexington plant employs approximately 3200 team members and has the capacity to slaughter 5000 cattle per day, which equates to about 4.8% of total daily U.S. beef slaughter, says UNL.
Total labor income losses from the closure are projected to be $530.43M per year across 7003 jobs, says UNL. Of those, 3212 are positions directly eliminated at the plant, with the remainder representing additional jobs that support the workers in other sectors. Effects on supporting jobs have already been reported with the terminated contract between Tyson and Fortrex, affecting 139 of that company’s sanitation employees. Even though the figures represent statewide impacts, losses are expected to be concentrated in Dawson County and the neighboring communities from which plant employees commute, says UNL
UNL furthermore expects a substantial reduction of tax revenues in the aftermath of the closure, it says. Annual losses in state personal income tax revenue are estimated at $23.2M. State sales tax revenues are projected to decline by $10.16M per year, and local sales tax revenues accruing to Dawson County are expected to fall by $2.77M per year, says UNL.
Tyson Will Pay $82.5M
Tyson meanwhile has agreed to pay $82.5M in a proposed settlement involving a class action lawsuit brought by direct purchaser plaintiffs (DPP) who alleged Tyson and other large beef companies artificially inflated beef prices. The document was filed in the U.S. District Court for the District of Minnesota and overseen by Judge John R. Tunheim. Lawyers for the plaintiffs, which include food distributors, grocery stores and other businesses, stated the buyers of meat alleged Tyson and other major beef companies charged its customers inflated prices between 2015 and 2022. The plaintiffs included Redner’s Markets and R&D Marketing, based in Mississippi.
JBS USA in 2022 agreed to pay $52.5M in this same lawsuit. Cargill Inc. and National Beef Packing Co. were also named in the original case. In October 2025, in a similar lawsuit, Cargill and Tyson agreed to pay $87.5M to cooperate in the Consumer Indirect Purchaser Plaintiffs (Consumer IPPs) case against the remaining defendants. That same month, Tyson reached an agreement to settle a lawsuit with consumer indirect purchaser plaintiffs in a lawsuit that alleged the company conspired to inflate pork prices.
PRODUCT OF USA HAS NEW RULE
AS of January 1, meat packers and processors who want to identify meat as a product of the United States must be in compliance with a new USDA labeling regulation that also applies to poultry and egg products. The rule, finalized in March 2024, lets companies label meat ‘Product of USA’ only if the animals from which it was derived were born, raised, harvested and processed in the U.S. Meat from live animals imported into the U.S. for feeding, harvesting and processing no longer will be allowed to carry that claim. Minimally processed product can use a qualified U.S.-origin claim, such as ‘sliced and packaged in the U.S. using imported pork.’
Meatpackers will not be required to label their product but if they voluntarily use “Product of USA,” “Made in USA” or an American flag, they must be able to provide proof of that claim. USDA will generically approve labels. No special process verification programs or additional approval steps are needed. A product with multiple ingredients can use a USA label as long as all the ingredients, except for spices and flavorings, comply with the rule’s criteria. A beef and pork sausage, for example, would have to source products from both cattle and pigs born, raised and slaughtered in the U.S. to use “Product of USA.”
MARKETS WILL REMAIN ON SAME PATH
THE U.S. cattle and beef markets will this year continue the path that the industry has been on since the market run began three years ago, as the cattle market supply and demand fundamentals remain unchanged. So says Oklahoma State University’s Derrell Peel in a preview of the year ahead. Beef cow herd rebuilding has likely been pushed into 2027, while higher beef prices have been driven by robust demand. But political pressures will heighten cattle market volatility, he says.
Cattle markets ended 2025 with some recovery in December after a major market correction through most of the fourth quarter, says Peel. The correction, precipitated by heightened political focus on beef prices, trade and tariff changes, and the announcement by Tyson Foods of a reduction in packing capacity, followed numerous record cattle and beef prices through the first three quarters of last year. The recovery will continue into the new year and higher average prices are expected, albeit with a lot of market volatility likely, he says.
A third year of sharply decreased beef cow slaughter appeared to be enough to stabilize the beef cow herd near the 2025 low inventory coming into 2026, says Peel. USDA will confirm cattle inventories for January 1 at the end of this month. The beef cow herd could be slightly higher, making 2025 the official cyclical low for the past cattle cycle. However, the lack of significant heifer retention means that little or no herd growth will be possible in 2026, with only limited growth prospects for 2027. Heifer retention is likely to increase but only slowly this year, he says.
The 2025 calf crop was projected to be the seventh consecutive smaller total since 2018, says Peel. Decreasing feeder cattle supplies led to lower feedlot placements, which were down 8.6% year over year in the past six months. Feedlot inventories were down 2.1% year-over-year in December, with lower monthly inventories year-over-year in the past 13 months. For the 12 months ending in December, average feedlot inventories were the smallest since late 2018. Lower feedlot production led to reduced cattle slaughter, which was down more than 6% in 2025, and it is expected to decrease further in 2026, he says.
Production Fell Despite Heavier Weights
Current market conditions on top of long-term trends have pushed carcass weights sharply higher in the past two years, says Peel. Fed steer and heifer carcass weights have increased 4.9% since 2023. In 2024, higher carcass weights were enough to offset lower cattle slaughter and keep total beef production steady year-over-year. But in 2025, beef production decreased despite heavier carcass weights and was down nearly 4% year-over-year. Beef production is expected to continue decreasing in 2026, he says.
Beef demand continues to be robust, with wholesale and retail beef prices higher year-over-year in 2025, says Peel. Despite ample supplies of pork and poultry, the retail price gap between beef and the other proteins continues to widen. Tighter supplies of beef and continued strong beef demand implies higher retail beef prices in 2026. Beef exports were unsurprisingly down in 2025, and they are expected to decrease further in 2026. Decreased beef production and high prices, combined with tariffs and trade disputes, will continue to limit U.S. beef exports. Beef imports increased sharply last year and will continue to grow in 2026 as the market attempts to mitigate decreased lean processing beef supplies due to sharply reduced cow slaughter with imported lean beef, he says.
Cattle and beef markets were buffeted by much political attention and trade policy vagaries in late 2025, says Peel. Political rhetoric is likely to continue injecting uncertainty into markets in the coming year. High beef prices are politically sensitive and have politicians scrambling to try to find ways to lower beef prices, although there is almost nothing that can be done in the short-term. Tariff changes in late 2025 will facilitate beef imports but they are unlikely to do much more than slightly mitigate ground beef prices and will have no impact on beef cut prices such as steak prices.
Markets Encourage Rebuilding
Cattle markets continue to be focused on encouraging herd rebuilding, says Peel. Cow-calf producers have to determine how best to take advantage of the current market amid another year of strong calf prices. Maintaining herd productivity and considerations of herd expansion are important questions for producers. Industry sectors above the cow-calf level will continue to face margin squeezes to varying degrees. Stocker and backgrounding enterprises in particular will see limited margins as the market encourages forage to be used for calf production rather than added feeder weight gain, he says.
Feedlots are likely to see additional challenges to margins and profitability as feedlot inventories decline under limited supplies of expensive feeder cattle, says Peel. Favorable feed market conditions will offset that only partially. Packers will continue to face poor margins as excess capacity persists despite infrastructure adjustments announced in late 2025. Declining beef supplies will pressure retail margins as retailers will struggle to pass only a portion of higher beef wholesale costs on to consumers, he says.
ERS FORECASTS 2026 IMPORTS
BEEF imports into the U.S. in 2026 are expected to be higher than previously forecast by USDA. Its Economic Research Service (ERS) last month raised its forecasts mainly due to the removal of an additional 50% tariff on imports from Brazil. The decrease in additional tariffs on beef imports from Brazil is expected to result in higher imports during the first half of the year as importers frontload product to fill the tariff-rate quota, says ERS. However, according to USDA’s Foreign Agricultural Service Livestock and Poultry: World Markets and Trade report, Brazil’s beef exports to the world are forecast to decline nearly 6% in 2026 due to a decrease in production resulting in lower exportable supplies. Global exports from Australia are also expected to decline slightly in 2026, says ERS.
Tighter global beef supplies in 2026 may limit the potential for further year-over-year growth in U.S. beef imports, especially in the second half of the year, says ERS. But due to the lower tariffs and increased expected imports from several countries, its import forecast for 2026 is increased from last month across all quarters, with relatively larger increases in the first two quarters. Its first quarter forecast is increased 175M lbs to 1.525 billion lbs. Its second quarter forecast is raised 200M lbs to 1.475 billion lbs. Its third quarter forecast is raised 50M lbs to 1.275 billion lbs and its fourth quarter forecast is raised 75M lbs to 1.175 billion lbs. Its annual forecast is 5.450 billion lbs, which would be a year-over-year increase of 2% and would represent about 19% of total beef disappearance, says ERS.
Retail Beef Prices Will Retreat Slowly
In terms of the domestic beef market going forward, although average composite beef cutout values have declined from their September peak, any retreat in retail prices will likely develop more slowly, says Andrew Gottschalk, HedgersEdge.com. Retail beef prices generally lag advances or declines in beef cutout values. Given the rapid and dramatic surge in beef cutout values which occurred this past summer, retailers may be somewhat reluctant to rapidly lower their prices to consumers, he says.
Consumer incomes will be the key to maintaining or improving beef demand going forward, says Gottschalk. Recent data is a bit concerning. Third quarter data showed usual weekly earnings for men and women in constant dollars at $1,337 versus the third quarter in the prior year at $1,268. This represented an increase of $69 per week or 5.4%. However, when adjusted for inflation, this represented a gain of only 1.3%. On a more jolly note, the average price of gasoline before Christmas was $0.14 per gallon below a year ago. This computed to a savings to consumers totaling $52.6M per day, he says.