The consensus among ag and livestock economists is that the nation’s cowherd is getting closer to rebuilding, but they urge patience as mid-year arrives.
Drought in key cow-calf states, interest rates and the opportunity to sell heifers has slowed the rebuild.
Glynn Tonsor, a professor in the department of agricultural economics at Kansas State University, said profitability in the near term is sound, but noted the elevated risks tied to higher cattle price exposure and elevated macroeconomic uncertainty tied to beef demand risk is also playing the part.
The result: the rebuild is taking time.
Drought’s lingering impact
David Anderson, a professor and Extension specialist in livestock and food production marketing at Texas A&M, said, “There continues to be significant drought areas in the Great Plains where a lot of beef cows are produced.”
Tonsor sees drought conditions easing, which also means several caveats. “Broader market uncertainty and amount of dollars at stake may give some excitement in expanding and others heartburn in expansion discussions.”
Recent rains in parts of Texas probably give some hope and opportunity to hold back replacements, Anderson said, adding, “the size of the checks sure looks good sometimes too good to pass up.”
Derrell Peel, a professor in agricultural economics and Extension specialist for livestock marketing at Oklahoma State University, said the cowherd is at about 28 million and it is still hard to predict when the herd rebuild will start. At some point cattle producers will shift their perspective from the short run that has had an eye on immediate returns to a long-term strategy.
“I do think that’s beginning to happen and most of that’s based on anecdotal indications from the meetings I’ve done and the conversations I have had,” Peel said.
Cattle on Feed clues
A late spring Cattle on Feed report indicated that fewer heifers were being placed in feedlots in comparison to earlier reports.
The July Cattle on Feed might provide a clearer picture because there would be several months of data to compare, he said.
Tonsor is also watching the reports. “I think we have initial signs of heifer retention, yet remain months (likely summer of 2026) away from large or nationally, market-relevant levels.”
He’ll be watching several other developments in the second half of 2025.
“End-user demand developments, or lack of change, is key to second half,” Tonsor said. “The unprecedented macroeconomics uncertainty may alter sound beef demand leading to downward pressure on cattle prices. If that risk is mitigated or minimized, then cattle producers are generally well positioned for a profitable 2025.”
James Mitchell, an assistant professor and Extension livestock economist at the University of Arkansas, in a column that appeared recently in the High Plains Journal, said the May Cattle on Feed report showed feedlots with a capacity of 1,000 or more head reached 11.38 million, which was down 1.5% from a year ago. The report noted that dressed weights should continue to provide a buffer against cattle supplies.
In 2024, he said heavier-than-expected dressed weights were on average 27 pounds above 2023 and that trend was continuing. He also noted that drought conditions have been an ongoing concern that also impacts feeder cattle markets and herd rebuilding efforts. Mitchell said according to the most recent USDA estimates, more than a quarter of the U.S. cattle inventory is in areas currently experiencing drought conditions.
Other parts of the chain are also impacted. The May Cattle on Feed matches up with the scenario of a smaller cowherd, Anderson said.
“I think we’ll start to see more worries about packing capacity as numbers shrink more,” Anderson said. “The lack of Mexican feeder cattle will exacerbate those worries. These worries will be the opposite of a few years ago when we didn’t have enough, now we’re going to worry about too much capacity.”
Stay on top of your game
The economists advised ranchers and managers to regularly revisit their plans and objectives.
“As always, one must know his cost of production and implied break-even prices,” Tonsor said. “While current prices are favorable, I would argue most underestimate their total costs.
Tonsor said producers need to know their comparative advantage, make investments and targeted efforts to reinforce that and by “staying in their lane” so they can make the most of that comparative advantage.
“These prices are great! And it’s about time,” Anderson said. “I think it’s worth thinking about how to thoughtfully and strategically use that money. Deploy it on good investments for the ranch, not on expenditures that end up increasing production costs or adding a bunch of depreciation and/or interest expense over the next few years.”
Peel said the market is operating with high revenues, but the goal is to maximize profits, which means managing expenses, too. Feed and input costs and interest expenses all have to be watched closely, too, as well as pasture and forage management with drought conditions can all affect the bottom line.
Cow-calf producers need to pay close attention to their forage availability and interest costs and for operators who buy and sell feeders and for feedlots it is a margin business, he said.
Feedlots have benefited from lower grain prices, and the cost of gain has boosted their bottom line, he said. However, he senses a tighter bottom line for that sector.
“I think feedlots are going to have a hard time finding cattle to put in the feedlot,” Peel said. “They’re going to be extremely expensive, and so their margins are going to get challenged as we go forward even with a better cost to gain.”
Dave Bergmeier can be reached at 620-227-1822 or [email protected].
