Navigating a red-hot cattle market

The United States beef market is experiencing a remarkable run. Feeder and calf prices are soaring and replacement costs are climbing just as fast.

Many producers have seen strong returns the past couple of years. But the cost of staying in the game is also becoming increasingly steep. Especially for those managing large-scale operations with tens of thousands of head of cattle.

“For folks who have been in the industry a while, it’s hard to forget how quickly things can turn,” said Sam Sterling, a Pinion ag business adviser. “Just like in 2012 to 2014, when profits flipped from $300 a head to losses just as steep, today’s high prices come with a dose of caution.”

The fundamentals—tight supply and strong demand—still point to continued strength. But the cattle market is no stranger to sudden shifts. A disruption in packing capacity, a disease outbreak like the New World screwworm situation in Mexico, or a global event can send prices swinging in a heartbeat.

“The moment you think it’ll stay high forever is when you get your tail kicked,” Sterling adds.

That’s why proactive risk management is more important than ever. Here are five practical strategies to help protect your operation in today’s strong, but unpredictable, cattle market:

1. Investigate Livestock Risk Protection

Livestock Risk Protection is a federally subsidized insurance program designed to help shield producers from unexpected price drops. In today’s volatile environment where global headlines can move markets overnight, LRP offers a flexible way to manage downside risk—without the margin calls that come with futures contracts.

Whether you’re marketing 50 calves or managing a full feedyard, LRP can be tailored to your needs. And while no one wants to use insurance—just like you don’t hope to wreck your truck or take a trip to the emergency room—it’s there for a reason.

With cattle prices at crazy highs, there’s a long way down if the market turns. That’s why more lenders are starting to require some form of price protection. Some banks even offer better interest rates for producers willing to take a little risk off the table.

2. Talk to your broker about all insurance options

Before committing to any risk management strategy, it’s important to fully understand your options. A trusted broker can help navigate the available tools like LRP, or other insurance products, and tailor a plan that fits your operation’s size, goals and financial position.

Just as important: Keep your banker in the loop. Everyone involved in your business should understand the risks and strategies in play. With prices at record highs, there’s a lot of opportunity. But also a lot at stake.

3. Don’t take risks you can’t afford

It’s tempting to chase high prices, but overextending can be dangerous. Make sure your exposure matches your risk tolerance and cash flow. If you can’t hedge a profit into a set of cattle, it may be wise to hold off.

“In this market, discipline matters,” Sterling said. “It’s not about chasing every opportunity, but about making calculated decisions that won’t threaten the future of the farm.”

4. Understand the risks you’re taking

Not every strategy works for every producer. Some who didn’t hedge were able to capture the full upside of the market and make $500 a head. Others who locked in early only saw $50. That’s the nature of risk management. It’s not about hitting the high mark every time, it’s about understanding the risks you’re taking.

Whether you’re hedging, insuring or buying cattle at current prices, make sure you know the potential outcomes. As Sterling puts it, “You have to know the risk you’re taking—and know it well—because this market can humble you fast.”

5. Remove some of the unknowns

In a market as unpredictable as cattle, with high highs and low lows, controlling what you can is critical. Right now, feed is one of the few inputs that is relatively cheap—grain, hay and corn are all favorably priced. It may be a good time to lock in some extra inventory.

Fixing any known costs like this can help reduce your exposure to wild price swings. The more certainty you can build into your operation, the better positioned you’ll be when the market eventually shifts.

Final thoughts

The beef market is offering strong opportunities, but also significant risks. Smart producers are using this time not just to profit, but to prepare.

Risk management isn’t about fear—it’s about staying resilient, protecting your margins and ensuring your operation is built to last.

Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies, or protect the current owners’ legacy through careful structuring and estate planning, Irsik applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at [email protected].