Why I Was Bullish Live Cattle Into 2026

Executive Summary#

Executive summary

A correct supply-cycle thesis with an implementation mismatch

On 20 November 2025, I presented a bullish view on live cattle at approximately 221.27 cents per hundredweight. The thesis was built on a prolonged contraction in the US cattle herd, slow biological replenishment and resilient beef demand. The original presentation recommended December 2025 and February 2026 futures and used $248.50/cwt as a target.

The fundamental thesis was validated. USDA data later showed 86.2 million cattle and calves on US farms at the start of 2026, with beef cows down 1%, the calf crop down 2% and cattle on feed down 3%.

Nearby futures exceeded $248.50 in June 2026. However, that occurred after the named December and February contracts had expired. The research direction was correct, but the selected maturities were poorly aligned with the slow cattle-cycle catalyst unless the position was explicitly rolled.

Investment View#

Positioning#

Market Background#

Cattle differ from storable commodities. A price increase cannot quickly produce more finished animals.

Rebuilding begins when producers retain heifers rather than send them to slaughter. That initially reduces beef supply further. The retained animals must mature, breed and produce calves, which then require additional time to reach market weight. The supply response is therefore measured in years rather than weeks.

This biological lag was the foundation of the thesis.

Investment Thesis#

1. The Herd Was Near a Generational Low#

USDA’s March 2025 long-term analysis projected that US cattle inventories would bottom near 86 million head in 2025, the lowest level since 1951. The January 2026 survey later reported 86.2 million head.

The level alone was not sufficient; the composition mattered. Beef cows were 27.6 million, down 1%, while the 2025 calf crop was estimated at 32.9 million, down 2%. Those figures constrained the number of animals available to enter the production chain.

2. The Supply Response Was Delayed#

High feeder and finished-cattle prices improve the incentive to rebuild, but drought, feed availability and producer balance sheets affect the decision to retain heifers.

Even when retention begins, it can tighten near-term slaughter supply before increasing future output. This created a convex setup: evidence of rebuilding could be bullish initially and bearish only later.

3. Demand Had Been Resilient#

Consumers continued buying beef despite high retail prices, limiting the degree of demand destruction. The thesis assumed that household substitution toward poultry would be gradual rather than immediate.

Demand resilience was a necessary condition. A small herd does not guarantee higher futures prices if recession or food inflation causes consumption to contract sharply.

4. Imports Could Cushion, Not Eliminate, Tightness#

Higher US prices attract beef imports and can reduce exports. USDA’s longer-term work expected imports to peak as domestic production remained constrained.

The original presentation was too dismissive of this channel. Imported beef cannot instantly replace every domestic cut or quality specification, but trade is a meaningful balancing mechanism and should be included in the bear case.

Catalysts#

Principal Risks#

Outcome and Reflection#

The January 2026 USDA inventory report confirmed the central supply thesis: total cattle inventory fell to 86.2 million head, beef cows declined and the calf crop contracted.

Public nearby-futures data show live cattle trading above the 248.50 target during June 2026, including closes around 249–255 and a late-June high above 258. Prices later retreated sharply toward the mid-220s by 17 July.

Research Methodology#

The original reference price, target and named contracts come from the 20 November 2025 Queen’s Tower Capital presentation. Fundamental outcomes use USDA data. Public continuous-futures data are used only as a transparent benchmark and do not represent an exact contract P&L.

Sources#

Originally researched and prepared by Srinivas Medida while serving as Commodities Sector Head at Queen’s Tower Capital, Imperial College Investment Society. Revised and expanded for publication on SM Research. Material public-market figures were checked against the sources listed below; contemporaneous presentation figures are identified as such. The investment view reflects the assessment made on 20 November 2025; the outcome section was updated on 19 July 2026. This material is provided for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument.