Market Outlook
Looks like another good year for calf pricesBy David Anderson
Calf and cattle prices are off to a great start in 2026 with many weight categories fully rebounding from the sharp correction in October 2025. USDA’s cattle inventory report in late January has laid the foundation for even higher calf prices for the rest of 2026 and beyond. But, there are some concerns to monitor in coming months.
Prices rebound higherCalf prices started 2026 in the Southern Plains at over $475 per cwt for 500-600 pound steers. The sharp decline in prices in October that took 5-600 steer prices down more than $50 per cwt to about $407 per cwt was well in the rear view mirror as fundamental reasons for high prices remained in place. Heavier feeder cattle and fed prices had not quite recovered fully from the decline but they, too, remained strong.
The cull cow market did not share in the selloff like calves and fed cattle. Cull prices typically decline late in the year but, they saw little to no decline simply due to tight supplies of cull cows and good demand for ground beef. Cull cow prices in the Southern Plains remain about $165 for lean cows, much as they have been since mid-2025. Cull cow prices usually increase seasonally from the beginning of the year into about May or June. They should increase seasonally this year to new record highs.
High milk prices, calf prices and lower feed costs have fueled an increase in the number of dairy cows in the U.S. to the most since the early 1990s. Coupled with increasing milk production per cow the growing dairy herd is producing record amounts of milk, driving down milk prices to unprofitable levels late in 2025.
The “most dairy cows since the 1993” sounds ominous for cull cow prices but, to put this in context there were 9.57 million dairy cows on January 1, 2026 compared to the 10-year average annual dairy herd of about 9.37 million cows. So, the dairy herd is only 200,000 head larger than the 10-year average. Low milk prices will likely cause some more herd culling in the coming weeks and months but, not enough to significantly impact prices.
A smaller herdUSDA’s cattle inventory report was released at the end of January. The report indicated a further decline in the total cattle herd with fewer cattle in most categories. The beef cow herd was estimated to be just over 1% smaller, down to 27.6 million head. While the direction of change was not a surprise the magnitude of change was a bit of surprise. A small increase in the number of heifers held for beef cow replacement was noted in the report but, it was not enough to imply a significant herd rebuilding underway.
The report does provide the data to underpin the expectation of fewer cows, calves, fed cattle and beef production driving prices to new record highs in 2026.
More volatility to come2025 was marked by some sharp market selloffs. These were mostly kicked off by rumors of screwworms, or political statements on imports, or reducing retail beef prices, or on-again, off-again tariffs. Higher prices in 2026 will create the opportunity for more of these occurrences. But, its important to remember that none of these causes of market volatility impact the fundamental supplies of beef and its demand. Tight beef supplies and good beef demand should allow prices to again recover from market corrections.
One more market development to watchDrought has certainly limited herd expansion in this cattle cycle. The 2011-2012 drought that really began in late 2010 forced the sharp decline in the herd in the Southern Plains and the U.S. and led to record high prices in 2014-15. A simple comparison using the Drought Monitor of mid-January 2026 to mid-January 2011 indicates that 69% of the U.S. is in some drought classification this year compared to 42% in 2011. It’s only the first of February and so there is a lot of time for spring storm systems to bring needed moisture. But, if these conditions persist into late April and May, then drought will be a serious problem this summer. Drought conditions will be a very important market development this year, potentially more so than other sources of price volatility.
On balance, 2026 is going to be an exciting year. Beef continues to benefit from higher protein consumption trends. Even though retail beef prices are record high, consumers see beef as giving good value for the money. The prospects for even higher calf prices and better profits loom ahead.
Anderson is a professor and extension economist for livestock and food product marketing at Texas A&M University.
