Growing Beef Newsletter
October 2026, Volume 17, Issue 4
Proactive risk management on fall calf purchases
Joseph Lensing, ISU farm management specialist
As the fall feeder cattle run begins, many producers are looking at ways to manage risk considering the market volatility the cattle market has experienced since July. When looking at purchase decisions that will be made in the weeks ahead, understand what breakevens might look like before filling lots. Over the last 3 years, buyers have become increasingly more aggressive in what seemed to be an indestructible market. Producers have now experienced a few notable headlines that show just how sensitive this market can become in a moment’s notice. Despite the fundamentals surrounding cow herd size, placements, slaughter numbers, demand etc. being strong, these fundamentals don’t entirely dictate movement in the cash and futures market.
When discussing risk management, it’s important to note that risk can’t be removed entirely, but minimizing potential losses in the event of adverse market movements is a responsible business practice. With today’s market conditions, simply forward contracting fed cattle will almost guarantee a sizable loss. Rather than locking in a selling price, establishing a price floor with upside potential is attractive to producers in times like this. For example, LRP (Livestock Risk Protection) establishes a floor based off of the CME Futures and uses the cash markets at the end of the endorsement to calculate indemnities. Alternatively, options and/or futures contracts are hedging tools that don’t require delivery, unlike LRP which requires delivery for insured fed cattle. Considering put options on new placements in late 2026 would establish protection in the event of declining futures prices while they are on feed.
Monitoring input costs, especially interest, feed, and fuel, will be important in making future purchase and sales decisions moving forward. With rising feed costs, the mentality of feeding calves to heavier and heavier weights is no longer as justifiable with current cash fed cattle prices.
In summary, cattle producers have deservingly enjoyed record breaking profitability in recent years. While I’m not saying that profitability has ended, I believe producers should protect recent profitability with some form of risk management in the months ahead as we navigate where this market decides to go. The market doesn’t care about your bottom line, be proactive instead of reactive.
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