Livestock Prices Rise, But Producers Must Manage Risks Wisely

Livestock markets in 2025 are experiencing more favorable conditions compared to recent years, particularly when juxtaposed with crop markets. Despite this positive trend, experts caution that producers should not relax their approach to risk management. According to Brittney Goodrich, an assistant professor of agricultural economics at the University of Illinois, the cattle industry exemplifies the challenges that can arise despite favorable pricing environments.

Several years of drought have significantly reduced domestic beef supplies, while border closures due to the New World Screwworm have further complicated import dynamics, resulting in higher prices. “During this last year, we haven’t decreased the herd size as much as we had previously. We’ve also not slaughtered as high a percentage of cows and heifers as we had in prior years,” Goodrich stated. “So, there may be some modest indications that we’re starting to think about expansion, but it’s going to be slow.”

Projections from the U.S. Department of Agriculture (USDA) suggest that substantial herd expansion is unlikely until between 2026 and 2027, which could subsequently exert downward pressure on feeder and fed cattle prices. As of December 1, 2025, USDA reported approximately 11.7 million head of cattle on feed, a decline of 2% from the previous year. Furthermore, placements in feedlots saw a notable decrease, with 1.6 million head down 11%, while marketings of fed cattle also fell, with 1.52 million head representing a 12% drop from 2024.

Despite the slow progress in rebuilding the U.S. cattle herd, beef markets experienced some price fluctuations this year, recently retreating from the peaks observed in September. Goodrich noted, “I think that was just a seasonal thing that we kind of expected to happen; it was just much more drastic than we’re used to seeing.” This volatility underscores the necessity for producers to remain vigilant, even during periods of favorable pricing.

Goodrich emphasized that all livestock producers should be aware of the inherent downside price risks, even when prices are high. “Understanding your cost of production and employing hedging strategies, if you’re large enough to engage in the futures and options markets, can be effective tools,” she advised. Additionally, a relatively new risk management option offered by USDA provides subsidized protection for hogs, feeder cattle, and fed cattle, allowing smaller producers to safeguard against adverse price movements without requiring significant market participation.

Producers should also keep a close watch on the New World Screwworm situation into 2026. Should the U.S. reopen live cattle imports from Mexico, this could exert pressure on domestic beef prices, particularly impacting feeder and fed cattle markets. Goodrich shared this analysis during the Illinois Farm Economics Summits, which took place in DeKalb, Peoria, and Mt. Vernon from December 16 through 17.

For further insights on food and farming news, visit FarmWeekNow.com. As the livestock industry navigates these complex dynamics, understanding market conditions and employing effective risk management strategies will be essential for producers aiming to achieve stability and profitability in the coming years.