Despite a backdrop of economic uncertainty, the U.S. animal protein sector, particularly beef, continues to outperform expectations, according to the latest Quarterly report from CoBank’s Knowledge Exchange Division. While broader economic indicators show signs of slowing, robust consumer demand, favorable feed costs and tight cattle supplies have combined to sustain profitability for producers.
CoBank economists noted that while the Federal Reserve is expected to cut interest rates gradually through 2026, inflationary pressures and volatile data have clouded the outlook. The report projects four to five 25-basis-point cuts over the next two years, bringing the overnight rate near 3% by the end of 2026.
U.S. personal consumption and unemployment remain steady, but slowing income growth—from 4% in early 2024 to about 2% now—signals weakening momentum. Consumers are increasingly relying on savings to sustain spending, a trend that can’t last.
Despite lower interest rates, U.S. agricultural exports have seen little benefit from a softer dollar. Meanwhile, a federal government shutdown and stalled congressional action are deepening economic uncertainty, delaying a planned $10-15 billion farm aid package for producers hurt by tariffs and oversupply.
Still, trade uncertainty, slower immigration and the explosion of AI-related investment are distorting traditional economic data. According to Rob Fox, vice president of CoBank’s Knowledge Exchange, “Sharp swings in monthly import volumes, a flattening of working-age population growth, and a soaring stock market make it difficult to gauge how ‘Main Street’ America is doing economically.”
Fox added that potential disruptions to federal data reporting due to the government shutdown could make it even harder for businesses to make informed decisions.
Beef leads the charge
As grilling season wrapped up over Labor Day, CoBank reported that the beef sector remains the standout performer in the animal protein space. Retail sales surged this summer, even as consumers contended with inflation. Circana data cited by CoBank showed beef leading all meat categories in dollar sales growth, with retail ground beef sales jumping 13% year over year to $1.7 billion in August.
Globally, beef prices are hitting record levels. CoBank noted that the United Nations Food and Agriculture Organization’s global meat price index reached new highs in the third quarter, with beef from Australia and Brazil also commanding premium prices as tight supplies meet strong global demand.
One hindrance to U.S. beef production has been the halt to feeder cattle imports from Mexico, which typically account for about 5% of the U.S. feeder population. Following the detection of New World screwworm, cross-border trade was effectively shut down in late 2024 and the impact has been felt in Texas feedlots.
“As a result of cattle availability concerns, cattle are staying on feed for longer to add more pounds into the system,” said Brian Earnest, lead animal protein economist with CoBank. “Even though these extra pounds of beef have partially offset the dampened cattle supplies, feed conversion deteriorates with more days on feed.”
Earnest said that this dynamic has increased the need for lean beef trim to maintain balance in ground beef formulations.
Domestic cattle prices set new records during the third quarter, providing solid returns for ranchers but straining packer margins. “While beef demand remains strong, several factors are limiting growth and forcing many cattle producers to reassess their future business plans,” Earnest concluded.
Pork, chicken sustain momentum
While beef continues to dominate the protein spotlight, pork and chicken are contributing significantly to overall sector strength, according to CoBank’s latest report.
According to Earnest, a smaller U.S. hog herd has tightened supplies and pushed prices higher, with lean hog futures climbing 20% and feeder pig prices up nearly 50% year over year by late September. Imports of Canadian feeder pigs rose 8.2%, helping offset domestic shortages. Profitability has improved sharply, with producers enjoying 17 straight months of profits—the longest streak since 2022—thanks to efficient production and firm prices.
Chicken, meanwhile, has stepped up as the value-driven alternative amid soaring beef prices. With retail promotions and restaurant menus highlighting poultry throughout the summer, the USDA’s feature index rose to 89% this year. Strong demand sent boneless skinless breast prices soaring above $2.70 per pound, while production increased modestly, with chick placements up 2% year over year. Despite recent softening in white meat prices, CoBank said the broiler sector remains well-positioned as consumers continue turning to chicken for affordability and versatility in 2026.
The beef-on-dairy trend
CoBank highlighted the beef-on-dairy trend as a key shift in U.S. livestock production. By breeding dairy cows with beef genetics, producers have created a valuable secondary income stream, capitalizing on strong beef prices and tight supplies. The report noted that prices for beef-on-dairy calves have surged to $1,000-1,200 per head, with some auctions topping $1,500.
“The beef-on-dairy opportunity shows no signs of slowing,” CoBank said, adding that the U.S. beef cow herd is now the smallest since 1961, keeping feeder cattle supplies exceptionally tight. This dynamic, combined with low feed costs, has buoyed margins across both the beef and dairy sectors. — Charles Wallace, WLJ contributing editor
