For the sixth consecutive year, the United States cattle herd started the year smaller at 86.6 million head in January, down more than 495,000 head from the previous January, according to the January U.S. Department of Agriculture’s Cattle report. Since 2020, the herd count is down more than 8 million head. This is the smallest count since 1951 when the herd totaled 82.1 million head.
A silver lining in the ever-shrinking herd is a slowing rate of decline. This year’s herd shrunk less than 1%, while the 2024 herd was down nearly 2% and the 2023 herd down more than 3%. The slower rate softens the blow on beef production.
However, will this be the bottom? The herd has been shrinking on challenges raising cattle in hot, dry or extreme cold conditions, shifting land use and feed availability, regulatory matters, and the time to rebuild the herd.
Path to cattle trough is long and slow, while time to peak is short and fast
It takes longer to shrink the cattle herd than to rebuild it. For example, the number of years to hit a bottom or trough in the herd count from the previous peak has averaged nearly eight years since 1990, twice taking eight years to reach a trough (in 1990 and 2004). The time to rebuild the herd to a peak from a trough has averaged less than five years. If history is the guide, there could still be one, two or more years until the herd hits the bottom of the trough.
The inventory of all U.S. cattle and calves as of Jan. 1, with the peaks and troughs identified, is shown in Figure 1.
Not surprising, the High Plains consistently has the highest share of cattle inventory from one year to the next with a share of 55% to 57% of all U.S. cattle. On Jan. 1 of this year, the cattle herd size across the High Plains totaled 48.6 million head, shrinking 230,000 head or one half of 1% from the previous year. Given the high share of the U.S. herd count, the size of the High Plains herd tracks the pattern of the U.S. herd. Cattle inventories across the High Plains on Jan. 1 were concentrated in Texas (25.1%), Nebraska (12.5%), Kansas (12.3%), Oklahoma (9.5%), Missouri (8.1%), South Dakota (7.3%) and Iowa (7.2%), as shown in Figure 2.
Improving slaughter weights leads to higher production
Despite a shrinking cattle herd, cattle harvest yields have improved. Federally inspected dressed weights were record high in January at 877 pounds, increasing 37 pounds or 4.4% from 2024. This was the largest one-year increase in dressed weight since 1990.
With a slower reduction in the herd size and a robust slaughter weight, federally inspected beef production totaled 2.3 billion pounds in January, which was 4%, or 89.5 million pounds, larger than the previous January, according to the Meat Statistics data of the USDA-Economic Research Service. This was the second largest beef production for the month of January.
Moreover, the amount of beef in cold storage dipped to an 11-year low of 453 million pounds for January, down 27 million pounds or 6% from the previous January. This was the second consecutive year that beef cold storage supplies were lower.
With improving harvest yields resulting in larger production together with reduced beef stocks, relatively ample supplies were available to the consumer market.
Cattle yield, beef production and cold storage levels are displayed in Figure 3.
Cattle and feeder prices riding higher on smaller herd
As the cattle and calf herd have been shrinking each of the past six years, the price farmers paid for feeder cattle has been rising. Since 2020, the price paid for feeder cattle is up more than 80% to $298 per hundred weight in January as reported in the USDA-National Agricultural Statistics Service’s Agricultural Prices report released in February. The price paid this January was 21% higher than 2024 while the 2024 price was up a record 34% from the previous year.
This price is an all-time high that producers pay to grow out the cattle herd. With producers paying increasingly higher prices for feeder cattle, there is a risk that cost will be too high relative price to sell cattle.
The price for calves has been attractive, drawing from faraway places. For example, farmers in Hawaii have been taking advantage of these higher prices by airlifting calves to the West Coast. Once off loaded from the plane the calves are trucked across the U.S. to various locations for finishing. Despite the long and seemingly expensive journey, the higher prices have made for a profitable venture.
The relationship between cattle and calf inventory and prices paid for feeder cattle is shown in Figure 4.
Given the smaller cattle herd, on-going challenges to expand the herd and the time to do so, futures prices continue to notch record levels. With wintery and extremely cold temperatures during January live cattle and feeder cattle prices were rising.
The most recent record high of the live cattle futures contract was 208.6 cents per pound on Jan. 28. It has since retreated to 200.3 cents per pound as of March 7.
The feeder cattle futures price was also setting new records, pegging 281.9 cents per pound on Jan. 30. Since hitting the record, feeder cattle prices have retreated to 277.0 cents per pound.
The futures prices for live and feeder cattle, and markers when each achieved new record price are shown in Figure 5.
Farmers continue to handle fewer cattle while experiencing improving harvest yield in the pursuit of producing beef. What is uncertain is how many more years it will take to hit the trough in the cattle herd. But will it matter if producers are able to achieve higher yields?
In the meantime, consumers have alternative proteins available to them. Selling beef to the consumer has other challenges including accessing export markets where tariffs and retaliatory tariffs threaten access to global markets.
Beef is still a sought-after protein, but at what price?
Ken Eriksen can be reached at journal@hpj.com.
