– Dr. Kenny Burdine, Extension Professor, Livestock Marketing, University of Kentucky
The last month has been a wild one for the cattle markets. In mid-October, markets seemed to be setting new records each week and shrugging off any bearish news that came along. Things changed quickly in mid-October and much has been written about this in recent weeks. It seemed to begin with a statement by the president about wanting to lower beef prices. Following that statement, markets appeared to latch on to any potentially bearish news, including the potential for increased beef imports and the possibility of resuming live cattle imports from Mexico.
As of the close on Friday November 14th, the November CME© feeder cattle futures contract was down more than $42 per cwt from October 16th. CME© live cattle futures have also fallen sharply, with the December contract down almost $30 per cwt over the same time. In truth, the fundamentals of the cattle market have not really changed. Cattle supplies remain very tight, and beef demand still seems to be strong. Markets discount prices due to uncertainty and that is exactly what they have done over the last few weeks. I think one must also consider that the markets may have gotten a bit too hot and that made them especially vulnerable this fall. For example, by mid-October that November CME© feeder cattle futures price had risen over 43% from where it started 2025 and is still up nearly 28% for the year.
Regardless of how we got to this point, the impact on the value of fed and feeder cattle being sold is substantial. I always get more price risk management questions on the heels of major downward price movements than after major upward price movements. While it’s good to evaluate risk management strategies during times like this, it is not a good time to develop one. Forward contracts, futures, options, and LRP insurance will not allow one to resurrect prices from mid-October unless a specific strategy was in place at that time.
The last few weeks have been another illustration of the importance of planning for downside price risk. We can talk all we want about how justified or irrational a market response may be, but markets are always going to react to new information. On the contrary, risk management plans are meant to be forward-looking. Producers should run budget scenarios for a wide range of sale prices, including major price swings that seem highly unlikely. By doing this, a farmer can make an informed decision about how much risk they are willing to accept and how much potential return they are willing to trade to limit some of that downside risk. This should be done on a regular basis for cow-calf operations, and at placement and on a regular basis for margin operations. Every operation is different and what makes sense for one operation may not make sense for another. But every producer should evaluate the impact of major price swings and consider strategies to manage that risk. Markets will always be reactive, but risk management strategies can’t be.
