Record Calf Prices & What's Next

July 28, 2026

The cattle market remains historically strong heading into the second half of 2026, supported by tight supplies and resilient consumer demand. However, Terrain Ag senior animal protein analyst Don Close says producers should continue approaching expansion and cattle purchases with discipline.

During a recent conversation on the LaneCast Ag Podcast, Close said the continued strength of beef demand, even as retail prices remain elevated, continues to help support prices for cow/calf producers.

“We’ve seen some concerns with consumers starting to trade down the value chain within the beef complex, but we’re not seeing any evidence at all that they’re going from beef to the other protein sources,” Close said. “Beef is still in an incredibly strong position going forward.”

Close said protein-focused diets and the growing use of GLP-1 weight-loss drugs may also be influencing the types of products consumers purchase. He pointed to growth in meat snacks as an example of beef demand expanding beyond traditional steaks, roasts and ground beef.

At the same time, cattle prices have reached levels that require producers to carefully evaluate risk. Close said producers are selling cattle at record prices, but they are also purchasing replacements at record prices.

The futures market remains heavily discounted compared with the cash cattle market, creating additional challenges for producers trying to manage price risk. Close said strong basis levels may continue as futures contracts move toward expiration and are forced to converge with cash prices.

Despite recent market pressure, Close said he does not believe cattle producers should panic.

“I think it’s a typical summer,” he said. “I still think there’s an opportunity late third quarter or early fourth quarter to see prices that are within striking distance of the spring highs.”

Drought Will Determine Herd Expansion

Close said weather will likely be the most important factor determining when and where the U.S. beef cow herd begins to expand.

The percentage of the cow herd located in drought-affected areas has improved, falling from roughly 70% to around 50%. However, conditions remain highly regionalized. Some cattle-producing areas have received abundant moisture, while others continue to face drought, wildfire damage and limited forage supplies.

That uneven weather pattern could result in herd expansion occurring in some regions while liquidation continues in others.

Close said weekly auction data had shown some signs that fewer heifers were entering the marketing system, which could have indicated the beginning of heifer retention. However, he cautioned that more reliable quarterly cattle inventory and feedlot data would be needed before drawing firm conclusions.

Close made those comments before USDA released its July Cattle Inventory report, which showed beef replacement heifers at 3.80 million head, up 3% from a year earlier, providing the first indication that some producers may be beginning to retain females for herd expansion.

For producers considering herd growth, Close said the best replacement female depends on the operation’s management, genetics and long-term goals. His personal preference would be a young to middle-aged bred cow rather than an open replacement heifer.

Close said a bred cow can produce a marketable calf during the first year of ownership, allowing the producer to begin recovering the investment sooner. A replacement heifer must first be grown, bred and carried through gestation, potentially creating a two-year period before generating a return.

Depending on age, quality, location and stage of pregnancy, Close said young bred females and cow-calf pairs may trade in the $4,000 to $5,000 range.

The Cow Herd May Not Return to Previous Levels

Close said the U.S. beef cow herd is unlikely to return to the inventory levels seen during previous cattle cycles.

Historically, each period of herd rebuilding has peaked below the previous expansion cycle. Close said the national herd may eventually recover into the range of 27 million to 28 million beef cows, but he does not expect it to return to 30 million head.

Advancements in cattle genetics, production technology and heavier carcass weights allow the beef industry to maintain significant production with fewer cows.

However, a smaller national herd could also lead to greater market volatility. A change of 2 million to 2.5 million cows represents a larger percentage of total inventory than it did when the herd was substantially larger.

Mexican Cattle Supplies May Permanently Change

The continued closure of the U.S.-Mexico border to feeder cattle because of New World screwworm concerns is also reshaping cattle production in Mexico.

Close said he does not expect Mexican feeder cattle exports to immediately return to their previous annual level of roughly 1 million to 1.2 million head after the border reopens.

Mexican producers have found ways to feed more cattle domestically and are expanding processing capacity. The border closure could result in Mexico becoming more self-sufficient in cattle feeding and beef production.

Close said reopening the border at the same time U.S. producers begin retaining larger numbers of heifers could help offset reduced domestic feeder cattle supplies. However, political and animal health concerns make the timing difficult to predict.

Beef-on-Dairy Becomes a Permanent Supply Source

Beef-on-dairy production is also becoming an established part of the cattle and beef industries.

Strong cheese, whey and other dairy product prices have supported dairy farm margins. The added value of beef-cross calves has further strengthened the financial position of many dairies.

Close said beef-on-dairy cattle have become fully commoditized and will remain a normal part of the beef supply chain.

Some dairies are also breeding a greater percentage of cows to dairy genetics to ensure they produce enough replacement females. That adjustment could slightly limit the number of beef-on-dairy calves entering the market.

Higher Prices Possible in 2027

Looking toward 2027, Close said cattle prices could move higher again, although gains are unlikely to match the dramatic increases seen during the last two years.

Analysts will have to weigh a greater number of variables, including rainfall, interest rates, fuel prices, feed costs, consumer purchasing power and the pace of herd rebuilding.

Close said the cattle market remains fundamentally strong, but the industry is entering a stage of the cycle where common sense and careful risk management are increasingly important.

“The market is still solid and still moving forward,” Close said. “But a little common sense needs to be applied.”

The full conversation with Don Close of Terrain Ag is available on the LaneCast Ag Podcast.

Source: LaneCast Ag Podcast