LOWER CATTLE SUPPLY AND STRONG EXTERNAL DEMAND SUPPORT A FIRMER PRICE SCENARIO FOR LIVE CATTLE IN 2026

BRAZILIAN BEEF CATTLE PRODUCTION IS HEADING INTO 2026 UNDER A CLEAR STRUCTURAL ADJUSTMENT PROCESS, MARKED BY A REDUCTION IN ANIMAL SUPPLY, CHANGES IN THE COMPOSITION OF SLAUGHTER, AND STRONG DEPENDENCE ON FOREIGN MARKETS. AFTER A PROLONGED PERIOD OF INTENSE FEMALE CULLING THAT BEGAN IN 2023, THE SECTOR IS NOW ENTERING A HERD REBUILDING PHASE, WHICH LIMITS CATTLE AVAILABILITY FOR SLAUGHTER AND CREATES CONDITIONS FOR MORE SUSTAINED PRICES.

PROJECTIONS INDICATE A DECLINE IN BEEF PRODUCTION IN 2026. ESTIMATES FROM RABORESEARCH POINT TO A DROP BETWEEN 5% AND 6%, WITH OUTPUT FALLING TO APPROXIMATELY 10.5 MILLION TONS IN CARCASS EQUIVALENT. THE NATIONAL CONFEDERATION OF AGRICULTURE PRESENTS A SIMILAR OUTLOOK, PROJECTING A 4.5% REDUCTION COMPARED TO 2025, ATTRIBUTED TO LOWER AVAILABILITY OF BOTH MALE AND FEMALE CATTLE AND THE RETENTION OF ANIMALS FOR HERD RECOMPOSITION.

THE SCENARIO IN 2025 WAS DIFFERENT. SLAUGHTER INCREASED 5.6% THROUGH THE THIRD QUARTER, WITH A STRONG PARTICIPATION OF FEMALES, WHICH ACCOUNTED FOR NEARLY 50% OF THE TOTAL. THIS MOVEMENT SUPPORTED PRODUCTION IN THE SHORT TERM BUT GENERATED NEGATIVE EFFECTS FOR FUTURE SUPPLY OF CALVES AND FEEDER CATTLE, AN IMPACT THAT BECOMES EVIDENT IN 2026.

IN THE INTERNATIONAL ARENA, CONDITIONS ARE ALSO RESTRICTIVE. MAJOR PRODUCERS SUCH AS THE UNITED STATES, AUSTRALIA, ARGENTINA, AND THE EUROPEAN UNION FACE HERD LIMITATIONS, LEADING TO EXPECTATIONS OF AROUND A 5% DECLINE IN GLOBAL BEEF PRODUCTION IN 2026. THIS REDUCES INTERNATIONAL COMPETITION AND STRENGTHENS BRAZIL POSITION AS A STRATEGIC SUPPLIER.

THROUGHOUT 2025, THE MARKET EXPERIENCED TWO DISTINCT PHASES. IN THE FIRST HALF, NEGATIVE PRESSURE STEMMED FROM THE INCREASED SUPPLY OF COWS AND HEIFERS AND THE ANNOUNCEMENT OF ADDITIONAL US TARIFFS. IN THE SECOND HALF, A REDUCTION IN THE VOLUME OF FINISHED CATTLE AND THE MAINTENANCE OF STRONG EXPORT DEMAND SUPPORTED A RECOVERY IN PRICES.

ACCORDING TO CEPEA, THE EXPANSION OF FEEDLOT USE AND THE GREATER ADOPTION OF FORWARD CONTRACTS CHANGED MARKET DYNAMICS. WITH A SIGNIFICANT SHARE OF SUPPLY ALREADY SOLD IN ADVANCE, MEATPACKERS REDUCED SPOT MARKET PURCHASES, CONTRIBUTING TO A GRADUAL INCREASE IN PRICES. IN 2025, FEEDLOT OCCUPANCY RATES REMAINED HIGH, SUPPORTED BY RELATIVELY LOWER COSTS FOR FEED AND REPLACEMENT CATTLE.

WITH THIS BACKDROP, FED CATTLE PRICES RECORDED AN AVERAGE INCREASE OF 22.4% COMPARED TO 2024, WITH STRONGER PERFORMANCE IN THE SECOND HALF OF THE YEAR. FUTURES CONTRACTS FOR FEBRUARY 2026 EXCEEDED BRL 330 PER ARROBA, SIGNALING EXPECTATIONS OF FURTHER APPRECIATION, ALTHOUGH CONDITIONAL ON THE EXTERNAL ENVIRONMENT.

FROM THE SECOND QUARTER OF 2026 ONWARD, PRICES ARE EXPECTED TO REMAIN EVEN FIRMER, DRIVEN BY A LOWER SHARE OF FEMALES IN SLAUGHTER AND A SUPPLY OF FINISHED CATTLE BELOW 2025 LEVELS. HOWEVER, EXTERNAL RISKS REMAIN ON THE RADAR. NEW TARIFFS FROM CHINA OR THE CONTINUATION OF TRADE BARRIERS BY THE UNITED STATES COULD AFFECT EXPORT FLOWS AND INCREASE VOLATILITY.

IN THE DOMESTIC MARKET, CONSUMPTION IS EXPECTED TO FACE CONSTRAINTS. RABOBANK PROJECTIONS INDICATE A POSSIBLE DECLINE OF 8% TO 9% IN PER CAPITA CONSUMPTION, WHICH COULD APPROACH 30 KG PER PERSON PER YEAR. HIGHER CATTLE PRICES TEND TO FAVOR CHEAPER PROTEINS SUCH AS POULTRY AND PORK, LIMITING THE RECOVERY OF BEEF CONSUMPTION EVEN WITH OCCASIONAL EVENTS THAT MAY TEMPORARILY IMPROVE PURCHASING POWER.

EXTERNAL DEMAND REMAINS THE MAIN PILLAR OF THE SECTOR. BY SEPTEMBER 2025, BRAZIL HAD EXPORTED 2.4 MILLION TONS OF BEEF, WITH GROWTH OF 16% IN VOLUME AND 35% IN REVENUE. CHINA ACCOUNTED FOR 47% OF PURCHASES, FOLLOWED BY THE UNITED STATES. THIS CONCENTRATION, HOWEVER, REPRESENTS A STRUCTURAL RISK, AS ANY TARIFF OR SANITARY CHANGES COULD HAVE A SIGNIFICANT IMPACT ON DOMESTIC PRICES.

AT THE SAME TIME, ADVANCES IN NEGOTIATIONS WITH THE EUROPEAN UNION AND THE POTENTIAL OPENING OF THE JAPANESE MARKET REPRESENT OPPORTUNITIES FOR DIVERSIFICATION. THE IMPLEMENTATION OF THE EUROPEAN DEFORESTATION REGULATION PRESENTS CHALLENGES, BUT IT MAY ALSO BENEFIT PRODUCERS WHO ADAPT TO TRACEABILITY AND ENVIRONMENTAL COMPLIANCE REQUIREMENTS.

ON THE CLIMATE FRONT, THE POSSIBILITY OF AN EL NINO EVENT IN THE SECOND HALF OF 2026 COULD IMPROVE PASTURE CONDITIONS, SUPPORTING ANIMAL FINISHING. EVEN SO, CLIMATE UNCERTAINTY REINFORCES THE NEED FOR PLANNING, RISK MANAGEMENT, AND FLEXIBLE STRATEGIES.

THE CATTLE MARKET ENTERS 2026 WITH A BULLISH BIAS, SUPPORTED BY RESTRICTED SUPPLY AND ROBUST EXTERNAL DEMAND. HOWEVER, THE ENVIRONMENT WILL BE MARKED BY HIGHER VOLATILITY, DEPENDENCE ON THE INTERNATIONAL SCENARIO, AND LIMITATIONS ON DOMESTIC CONSUMPTION, REQUIRING INCREASINGLY TECHNICAL DECISIONS FROM MARKET PARTICIPANTS ACROSS THE SUPPLY CHAIN.