With the cattle herd at a 73-year low, we are all wondering when herd rebuilding will begin and how long this cattle cycle will last. In the last six years, 8 million head of cattle have left the herd. Even with mass liquidation, beef production continues to grow, said Kevin Good, CattleFax analyst, at the National Cattlemen's Beef Association (NCBA) CattleCon 2025 in San Antonio, Texas.
Where are we in the cattle cycle?
This past year, in 2024, the U.S. harvested a million fewer cows than the year prior. In 2023, there were over 1.5 million cows harvested. Because of this, there has been increased cull cow values and record-high trim prices. Packers’ margins have been very tight and will continue to be tight until prices come down.
CattleFax forecasts a continued supply decline, particularly on the beef cow side, through this year and next.
“You can see our forecast going through this year and next year, continued decline, particularly on the beef cow side, a little bit of decline on the dairy cow side this year as well,” Good said.
From a culling rate standpoint, the first nine months of 2024 was still in mild liquidation. By the fourth quarter the culling rate, of cow slaughter alone, showed turning the corner from liquidation to expansion. However, beef heifer replacements continue to be historically low.
“We can state that if you looked at heifer placements through the fourth quarter, heifers on feed and heifers running through the auction arena, all those would suggest that we're starting to stabilize the beef cow herd,” Good said. “But when you combine those two together [cow slaughter and heifer replacements], it would suggest that this turnaround is going to be much slower than we experienced in the last cycle.”
The beef cow herd is expected to see the cycle low to start 2025 at 28 million head. This is 200,000 head below 2024 and down 3.5 million head from the high in 2019.
If this year has the weather challenges as predicated, it will take longer to start herd growth. Additionally, the cost in today’s environment is high, from cost of capital – land, feed, water – interest rates, urban sprawl and alternative land uses. While the incentive to expand is here, there’s a lot to overcome to get there. Good suggests "mild expansion as we move through the next couple years.”
Supply
Beef supply is down. According to CattleFax, cow and bull slaughter is forecast to continue decreasing 300,000 head in 2025 to the total of 5.9 million head. Feeder cattle and calf supplies outside of feedyards will be about 500,000 head smaller than 2024 at 23.7 million head. Cattle on feed inventories began 2025 slightly below year-ago level near 11.9 million head, with a more current supply than last year. On-feed inventories will be constrained by a tighter feeder cattle supply and placement pace in 2025. Additionally, commercial fed slaughter in 2025 is forecast to decline by 700,000 to 24.9 million head.
“As we think about where we're at within the cattle cycle, available supplies will get tighter, not only this year but the next couple of years,” Good said. “At the same time, we're adding capacity, so that bodes well for the cattle producer. As far as leverage, we will continue to get a higher and higher percentage of the available dollars that are above us.”
A predicted 0.8-pound decline in net beef supply in 2025 will lead to an average of 58.4 pounds of beef per person per year. The dip in supply of beef from beef cattle is being offset by increased carcass weights with cattle on more days on feed and an all-time high of beef production coming from the dairy herd.
“Now I talked about the number of cattle that we harvested last year,” Good said. “Fed cattle were flat. Cow slaughter was down about a million head, but we offset all of that with increased carcass weights last year. Carcass weights last year went up about 26 pounds. That represents equivalent about a million head of cattle being harvested to help the offset.”
He added, “As we go forward, is there any reason to doubt that we'll do more with less short term the next few years? No, there isn't. We're paid on pounds. The market's demanding tonnage, and because of record-high beef demand, we will continue to produce more tonnage with less as we go forward.”
Demand
While beef supply is falling, demand is increasing.
According to CattleFax, beef prices climbed further in 2024, averaging $8.01 per pound, reflecting the second-highest demand in history. While demand may soften slightly in 2025, retail prices are projected to rise further, averaging $8.25 per pound.
Wholesale beef prices are expected to mirror retail trends, and margin realignment has further compressed retail and wholesale margins to historically thin levels.
While inflation remained moderate in 2024, high consumer debt levels and persistently elevated interest rates, coupled with the availability of cheaper alternative protein options, may influence consumer purchasing decisions. However, premiums for higher-quality beef should remain, as consumers have shown a willingness to pay for Choice grade or better beef.
“If we think about where we're at from a demand standpoint, we need to recognize what's driving the ship right in here – the cows are,” Good said.
Demand for animal proteins has continued to grow around the world. U.S. beef exports performed better than anticipated in 2024, dipping by just 1%. However, a further 5% decline is projected for 2025, driven by reduced U.S. production and higher prices, Good said.
Additionally, U.S. beef imports surged 24% in 2024 due to reduced cow slaughter and high prices for lean beef. Growth is expected in 2025 but may be limited by global competition and supply constraints.
“So the message here is this: We have gained market share,” Good said. “Demand is stout. We continue to expect that to be the case, but we still have to have a little bit of caution. Price spreads are wide. We have to recognize that our consumer today is fully employed or close to it. Are there some changes taking place that will affect the economy? That makes us just a little less optimistic.”
