Trouble lies ahead

I fear that major trouble lies ahead for the Texas beef cow herd. While active cases of New World screwworm have declined by over 50% in Mexico, the country still reported nearly 500 active cases during December. On Dec. 31, an active case was discovered in a five-day-old calf within 200 miles of the border. Next, an active case was reported in a seven-year-cold cow also close to the U.S. border. Finally, and this information is not well known (perhaps purposely being kept quiet), active cases have been reported in wild boars also within 200 miles of the U.S. border.

In my opinion, the screwworm fly will cross the border on the back of a wild pig. There’s no way to stop it. There’s no protocol for wild pigs zig-zagging on either side of the border. There’s no fence. Regardless of whether or not the screwworm actually gets into Texas, the threat is real, and this will likely keep the border closed.

With the border closed and given a smaller calf crop, placements of cattle into the feedyards will continue to decline during 2026. Based upon declining placements over the last several months, the supply of market-ready cattle during the first quarter should continue to decline.

Production will not decline nearly as much as slaughter due to heavier carcass weights. Last year, average carcass weights, consistently record high, ran from 25 to 30 pounds over the previous year. This year, while weights should remain record heavy, the difference should narrow somewhat.

Related: High-impact weather ahead across wide area of U.S.

Despite reduced slaughter capacity in 2026, numbers available to kill will not exceed capacity. Never forget that beef packers buy cattle by the head but sell beef by the pound. The competition for a string of heavyweight cattle will be intense. This will occur despite unprofitable margins. Don’t feel sorry for the beef packer. Packers are highly diversified, making solid profits in their pork and poultry operations. Over the long run, no one wants to lose market share.

Many cattle pundits believe that live cattle futures, cash steer prices and wholesale beef prices scored a major top last fall. I disagree. I’m simply not in that camp. The bearish analyst is focused on two items. First, many believe the U.S. beef market will be flooded with imported beef. Guess what? Brazil beef imports filled the “other” quota in the first three days of the new year. Many thought it would take three months. From here forward, beef imported from Brazil faces a 26.5% import tariff. Guess what? The price of lean 90% beef did not break during the three-day flood of imported beef from Brazil. My sources report that beef for out-front delivery is trading sharply higher than current beef prices. I challenge the bearish analyst to explain this.

Related: This time IS different!

Second, the bearish trader believes that consumers cannot afford beef due to record-high retail prices. However, currently there is absolutely no evidence that this is indeed the case. Retailers are consistently concerned about not having enough supply. Recent data indicates that the upper middle class in the U.S. has expanded dramatically over the last couple of years. It’s a fact that the top 20% of wage earners in the U.S. are responsible for 80% of consumption. Indeed, chicken wars are real, but this is happening among the lower 50% of wage earners. Repeating, the evidence remains compelling that beef demand remains very strong.

Barring a major recession in 2026, I’m expecting record-high cash steer prices, record-high wholesale beef prices and record high futures prices. Regarding possible herd expansion, evidence indicates very little expansion has occurred so far. Much will depend upon weather moving forward. Pasture conditions into summer will be critical to observe. Feed costs are expected to remain low from a historical perspective. Keep in mind, however, that even given ideal conditions, only a moderate herd expansion is necessary in the face of consistently heavier carcass weights. Globally, however, both Brazil and Australia are in sync with the U.S. on the cattle cycle. This means tightening global supplies in the months ahead.

Related: Cattle markets plunge on false New World screwworm rumors

In the face of record-high feeder cattle prices, the price of poker is going up. It’s critically important to maintain some level of risk management through the use of puts, put spreads and LRP insurance.

*Dennis Smith publishes his evening livestock wire daily. For a free 30-day trial to this information send an email to .