For the first time in years, cattle ranchers, backgrounders, stockers and cow-calf producers are seeing dependable economic returns. According to Bernt Nelson, economist at the American Farm Bureau Federation (AFBF), this long-awaited profitability has created a rare opportunity for producers to rebuild working capital and consider restocking America’s beef herd. Yet, he cautions, record-high production costs and market interventions aimed at curbing consumer beef prices threaten to erase these gains.
Cattle cycle and drought
Nelson noted the U.S. cattle industry moves in roughly 10-year expansion and contraction phases—known as the cattle cycle—responding to profitability and resource availability. Nelson said that the U.S. is currently in year 12 of the cycle and year seven of contraction.
On Jan.1, cattle inventories totaled 86.7 million head, the lowest in 74 years. While the current price environment provides incentives to rebuild herds, Nelson warns that if cattle prices drop and profitability fades, producers will have no reason to retain breeding stock, prolonging the contraction.
“Right now, positive economic returns could provide farmers and ranchers incentives to rebuild the cattle herd, but if prices fall, and returns disappear, the cattle herd could continue contraction,” Nelson said.
Pasture conditions are a foundational factor in herd health and cost control. When pastures thrive, feed costs decline; when drought persists, costs skyrocket. Nelson underscored that pasture deterioration between 2021 and 2023 forced many producers to send female cattle to feedlots rather than keep them for breeding.
Ranchers faced hard choices—hauling water for miles or buying hay at record prices, sometimes spending more on freight than the feed itself.
“Selling off breeding cattle wasn’t just an economic decision; it was an emotional one, representing years or even generations of herd development lost in a single season,” Nelson said. “Drought has forced families to part with genetics they had spent decades refining, knowing it could take years to recover what was sold in a matter of weeks.”
Demand and imports
Despite record-high beef prices, U.S. demand remains strong. USDA projects 2025 beef consumption at 28.6 billion pounds, with a modest dip expected in 2026. Nelson emphasized that demand is “the lynchpin helping our nation’s cattle farmers and ranchers remain economically viable.” Higher beef prices have trickled down from retail to the ranch gate, allowing producers to recover financially. Still, Nelson cautions that these profits are thin and highly sensitive.
“If demand for U.S. beef weakens, whether due to increased beef imports or changing consumer preferences, cattle prices will likely decline,” Nelson wrote. “This would create a major obstacle to any meaningful expansion of the U.S. cattle herd.”
Beef imports play a complex role in balancing U.S. supplies of lean and fat trimmings used for ground beef. Nelson noted that year-to-date, imports are approaching 1.2 million metric tons, roughly 10% of domestic consumption. Notably, imports from Brazil are up 94% year over year, and recent policy changes could expand imports from Argentina.
On Oct. 23, the administration announced an increase in the tariff-rate quota for Argentine beef—from 20,000 metric tons to 80,000 metric tons—to lower consumer prices. Under the current tariff-rate quota, Argentina may export up to 20,000 metric tons of beef to the U.S. each year at a reduced tariff rate; any volume beyond that threshold faces higher duties. So far in 2025, U.S. imports from Argentina have reached approximately 30,000 metric tons. Expanding the quota to 80,000 metric tons would represent roughly 3.5% of total U.S. beef imports to date and about 0.6% of USDA’s projected domestic beef consumption for 2025. However, Nelson warns that such moves can hurt domestic cattle producers.
“This amount will not have a measurable impact on prices consumers pay for beef, but the announcement has already caused future prices for feeder cattle to fall by 7%,” Nelson said.
New world screwworm
Adding another layer of uncertainty is the reemergence of the New World screwworm (NWS), a parasitic pest last eradicated in the U.S. in 1966. Detected just 70 miles south of the U.S.-Mexico border, it prompted a July 9 border closure to cattle, bison and horses.
Nelson calls NWS “a serious but manageable threat,” but he warns of its economic implications. “The U.S. typically imports 1.3 million cattle annually from Mexico,” he said. “A prolonged closure adds strain to an already tight supply chain and creates more uncertainty for ranchers planning their operations.”
According to Nelson, several consecutive years of drought, low cattle prices and record-high input and supply costs have steadily eroded the nation’s cattle herd. That contraction, combined with strong consumer demand for beef, has driven both cattle and beef prices to historic highs. Nelson noted that while ranchers are finally operating in the black, their margins are fragile and could vanish quickly if prices soften.
“Market intervention efforts, including increased imports, would add another barrier to growing the cattle herd and potentially incentivize more contraction in the cattle inventory,” Nelson said. “This could drive beef prices even higher and increase U.S. reliance on imported beef to meet domestic demand.” — Charles Wallace, WLJ contributing editor
