Digging Deeper...

The U.S. beef cattle industry is currently in its fifth year of declining numbers, falling 2% in 2024 to 28 million going into 2025. That is a drop of 150,000 from 2023 and 3.5 million short of 2019, according to Kevin Good, vice president of market analysis at CattleFax. Historically speaking, this inventory is the lowest since 1961, according to USDA data. “Some of the top analysts in the industry do not expect the beef-cow sector to return to 2023 levels for three to four more years,” says Abbi Prins, an industry analyst at Colorado-based CoBank’s Knowledge Exchange.
By Dennis McLaughlin, McLaughlin Writers LLC.
Sources: Farm Journal’s AgWeb Unscripted Podcast, February 10, 2025; CoBank, Abbi Prins, CoBank’s 2025 Year Ahead Report; Kevin Good, vice president of market analysis, CattleFax, February 5, 2025; Darrell Peel, Ph.D., Oklahoma State Extension Specialist for Livestock Marketing, The Cattle Range, January 2025; Stephen Koontz, Ph.D., Department of Agricultural and Resource Economics, Colorado State University, citing information from USDA’s Cattle Report, January 31, 2025.

Rebuilding Beef Cattle Herd Could Take A While

Appearing on AgWeb’s Unscripted podcast this month (February 10), Dan Basse, president of Chicago-based AgResource Company, said the escalation of cattle prices would continue. “I don’t think this cycle is over for another two-and-a-half or three years,” he said. American ranchers have embraced the windfall. “This is going to keep going on. I don’t think cattle [prices] have hit their all-time highs yet.” That is good news for American ranchers, he stated.

Falling feed costs and rising producer margins have renewed expansion interest in animal protein segments, researchers at CoBank explained. However, labor, construction, and land costs remain elevated, tempering expectations for any meaningful supply growth in the near term. “U.S. beef cow herd expansion is not expected to start until 2026 or 2027. The smaller herd will further support higher feeder and fed cattle prices in the coming year,” the researchers reported.

“With consumers now pushing back on beef prices already near historic highs,” said Abbi Prins, “packer margins will remain under pressure well into 2025.”

According to Farm Journal’s January Ag Economists’ Monthly Monitor, “Shrinking supplies and strong demand are the two major drivers of the historic run in cattle prices.” EMM’s economists are most bullish on cattle in 2025 among the 10 major commodities they surveyed recently.

Outlook

The first quarter of the calendar year is typically soft for cattle and beef markets—but not this year. Live cattle futures and cash live weights have traded above $2 per pound, said Stephen Koontz, Ph.D., Department of Agricultural and Resource Economics, Colorado State University.

“With information from USDA’s Cattle Report (January 31),” he noted, “the supply side of the market outlook for 2025 is fairly straightforward—tight supplies are here to stay, and there is no substantial evidence of herd building.”

When herd building does commence, then heifers in the feeder mix will be reduced, Dr. Koontz added. “And this will further tighten supplies.” Basse thinks the market could see some short-term price volatility. “Cash cattle will make higher highs as we look toward the fourth quarter of this year,” he said.

Herd Building Dynamics

The latest findings in recent cattle reports and surveys confirm that the beef cow herd continued its five-year contraction in 2024.

Darrell Peel, Ph.D., Oklahoma State Extension Specialist for Livestock Marketing, in a report published by The Cattle Range—an internet platform that provides cattle information and market news—wrote that “cow culling will determine herd dynamics in 2025, and heifer retention in 2025 can set the stage for some herd growth beginning in 2026.”

In 2024, cow culling decreased sharply to 10.2%, about equal to the long-term average. It is headed in the right direction, Dr. Peel said, but will need to drop further to 9% or below for two or more years. “That would indicate a herd expansion.”

More critical, he noted, is the heifer retention part of herd rebuilding. “Heifer retention has declined continuously since 2021,” said Dr. Peel, “and has not yet begun to increase, as is required for herd expansion.”

Prospects for herd growth in 2025 are limited. Part of the replacement heifer inventory is the number of bred heifers available this year. That number, he explained, was 2.92 million head, down 1.7% year over year and the smallest in data going back to 2001.

With this supply of bred heifers, cow slaughter will have to decrease at least 7% year over year just to hold the beef cow inventory stable for the year. That would imply a cow culling rate of 9.3% for the year. “A cow culling rate less than that,” he claimed, “will be required for even fractional herd expansion in 2025.”

The supply of bred heifers is pretty well set for 2025. There is little that the beef industry can do to change herd growth prospects in the short run. The inventory of heifers saved for breeding was also determined in the Cattle Report at 1.75 million head.

“These heifers can be bred to calve in 2026,” he said. Producers may decide to breed some additional heifers in 2025, but this impulse breeding can augment the supply of bred heifers for 2026, Dr. Peel warned. Impulse heifer breeding was an important part of the rapid herd expansion from 2014–2019.

This impulse heifer breeding would utilize heifers currently counted as part of the "Other Heifer" category in the 2025 cattle inventory. “In other words, increased impulse heifer breeding will reduce available feeder cattle supplies on a one-for-one basis in 2025.”

Cow culling will determine herd dynamics in 2025, Dr. Peel claims. “But that will depend on what producers are trying to do and what Mother Nature will let them do.” Drought remains a lethal threat. The beef cow herd could stabilize, decrease more, or maybe even increase slightly in 2025.

Heifer retention in 2025 could set the stage for some herd growth beginning in 2026. “The inventory of replacement heifers suggests that there are few plans for increased heifer breeding going into 2025,” he concludes, “but impulse heifer breeding during the year may result in additional bred heifers for 2026.”

But it all hinges on what producers are trying to do—and whether drought might limit their plans.