Despite drought, labor unrest and health threats at the border, cattle prices are holding in record territory. In his Q3 2026 outlook, “Drought: Likely Dashing Hopes for Expansion,” Terrain Senior Animal Protein Aanalyst Dave Weaber forecasts fed cattle averaging $252–$258 per cwt in Q3 and Oklahoma City 450‑lb. steer calves climbing from about $500 to $555 cwt.
“The forecasts remain record high because of still strong beef demand and historically short supplies,” Weaber says, even as packer margins remain in the red at –$200 to –$300 per head and slaughter runs 2% to 4% below last year.
Here are the four key takeaways from Weaber’s Q3 outlook:
1. Drought’s Deadbolt on the Herd
Producers hoping for herd rebuilding will have to keep waiting. According to Weaber, more than three-quarters of the U.S. beef cow herd remains under drought conditions, and the odds of a strong El Niño arriving late enough to actually help pastures are climbing — not falling. The result, he says, is a market defined by tight supplies, resilient demand and record-high prices, but little room for the kind of expansion producers have been waiting years to see.
Rather than laying the groundwork for a rebuild, drought is pushing heifers and pairs off grass and into the market. Any increase in near‑term feeder and calf supplies, he cautions, is more liquidation than expansion.
“For now, it appears that drought conditions and heifers leaving ranches due to limited feed availability are the only potential for an increase in available feeder cattle and calf supplies for the foreseeable future. These are not avenues for sustained herd expansion.”Layered on top of that, Pacific sea surface temperatures have warmed into El Niño territory, and Weaber notes there are “better than two‑thirds odds that it will be a strong or very strong event.” For much of cow–calf country, that translates into more volatility, not relief.
2. Early‑Weaned Calves and New World Screwworm Tighten Supplies
Auction data from the Northern Plains show how drought is reshaping calf flows.
“Auction market data in the northern plains show increasing numbers of very light calves being sold off ranges, likely the results of early weaning programs or splitting cow-calf pairs upon their arrival at the auction market,” Weaber says.
At the same time, New World Screwworm has added a new stressor at the southern border.
“New World Screwworm has entered the United States via the Texas-Mexico border, making it harder for surrounding farms and ranches to move cattle further north,” Weaber says.
The confirmation, he adds, appears to have put the reopening of the U.S.–Mexico border to live cattle trade on hold, adding to what he calls a “feeder cattle and calf supply deficit.” The health risk and regulatory reaction are now part of every conversation about cattle movement through Texas and neighboring states.
3. Packers are Under Pressure; Feeders Still Hold Leverage
Weaber stresses packer capacity is still bigger than cattle supply even with Cargill’s Fort Morgan plant locking out employees. The lockout is a major local disruption, but it didn’t spark panic in futures.
The plant, he notes, “can process up to 4,700 head per day, [and] had not slaughtered cattle since the third week of April.”
Even so, the board looked through the headlines. “The futures market reaction to the lockout news was limited,” he summarizes. “By mid-June, front-month live cattle futures prices had rallied above prices that existed on the day of the announcement.”
Structurally, packers are still over‑built relative to cattle numbers.
“Packer slaughter capacity still outpaces cattle availability by 6,000 to 8,000 head per day,” he adds. “Packer margins remain negative, ranging from minus $200 to minus $300 per head. I don’t expect them to improve during the summer, and they may worsen if beef prices falter.”
Meanwhile, slaughter and carcass data show feedyards are more current than they were earlier in the year. Average carcass weights hit their lowest levels of 2026 to date in late May but were still 31 lb. per head above last year, and the share grading Choice or Prime has declined week over week since late April — a normal seasonal pattern that, together, hint that cattle feeders have gotten slightly more current in their marketings of finished cattle.
4. Demand Stays Robust as Supplies Stay Short
Despite higher fuel costs and sticky inflation, beef demand has held up better than broad consumer sentiment.
“Beef demand and consumer spending remain resilient despite consumer sentiment measures for the whole economy waning due to rising fuel costs and rising inflation, dashing the odds of an interest rate cut by the Federal Reserve,” Weaber says.
Scanner data show May beef volume down 1.4% from a year earlier, with dollar sales slipping for the first time in many months. But with retail prices still about 13% above year‑earlier levels, Weaber cautions against calling it a demand collapse.
“May beef sales volume declined 1.4% compared with a year earlier, and sales dollars declined for the first time in many months. This isn’t to say that demand declined,” he stresses.
“Likely, the worst thing you can say about demand is that the rate of growth slowed but remained positive.”
Looking ahead, Weaber expects Q3 2026 cattle slaughter to run 2% to 4% below year‑earlier levels and Q4 beef production to run 3% to 5% below 2025. Adding the average increase in fed cattle dressed weights will likely offset 3% to 3.5% of the slaughter decline and record‑high imports could more than make up the difference.
“In this scenario, continued record high imports could cause net beef supplies and per capita consumption to increase about 1% for the last two quarters of 2026,” he predicts. “Rising retail prices during the summer will equate to continued robust beef demand.”
What Does This Mean for Producers?
For cow–calf producers and stocker operators, this outlook points to a few practical takeaways:
- Herd rebuild can wait; survival and flexibility can’t. Keeping core genetics intact and managing forage and water risk may be more important than building the cow herd.
- Early‑weaning tools matter. The “increasing numbers of very light calves” in Northern Plains auctions underline the value of having early‑weaning rations, health protocols and marketing plans ready to go when grass runs short.
- Use price strength to upgrade, not overextend. With record‑high calf and feeder values, there’s opportunity to improve balance sheets, invest in water and grazing infrastructure, and cull on fertility and disposition — without betting on a near‑term expansion window.
In other words, this is still a short‑supply, strong‑demand cattle market — but one where weather, health risks and policy can have a huge impact. Staying nimble on marketing and risk management may be just as valuable as every extra pound you put on a calf.
