The beef industry is currently experiencing unprecedented times. Mainly due to drought, the cow herd has reached a 75-year low, which has translated into the value of feeder cattle reaching heights few, if any, ever thought would be achieved. In a summer video auction, the largest class of feeders marketed were steers weighing 600 to 649 pounds with 23,093 head averaging $397.32/cwt, which equates to $2,452.84 per head! It wasn’t that many years ago when the industry started marketing for the first time feeder cattle that would bring over $1,000 per head.
Still, the industry is fraught with unknowns and challenges. With the cost of feeder cattle, it has put feeders in a tough position to pencil a profit and hedge the cattle. This means they are assuming a significant amount of risk on each pen they fill. The USDA Cattle inventory report released at the end of July showed inventory on July 1, 2025, was 99% compared to July 1, 2023, (2024 was not reported due to USDA budget constraints).
Packers are in an even more precarious position, currently only running at three-quarters capacity at fed cattle plants and two-thirds capacity at cow processing plants. This lowers their efficiency, which combined with their input costs of cattle, has them often running in the red. Plus, there are a whole host of other issues from the average age of commercial producers: the New World screwworm fly with its flesh-eating larvae making its way towards the U.S. from Mexico, beef-on-dairy, and the big issue of unsettled trade and labor policies.
Herd rebuilding possibilities
With the strength of the feeder market, in any normal cattle cycle, the industry would be in the middle of rapid expansion. However, the Cattle inventory report had heifers over 500 lbs. being kept as replacements on July 1, 2025, at 97% of the same inventory on July 1, 2023. This indicates there is no rebuilding taking place yet, and in fact, total cattle inventory is down 1%, indicating we still may be contracting as an industry.
One can speculate that rebuilding is not occurring because the average age of commercial producers is over 60 years old, and their land and cattle—even if just sold as weigh-up cows—have never been worth more money. So, if there was ever a time to retire—particularly if they don’t have another generation to follow them—now is the time. However, when you talk to producers who are in it for the long run, they seem to indicate that they are keeping some extra heifers back.
Imports and exports
Cull cows and bulls are particularly in demand to supply the grind market. Ground beef makes up approximately 46% of the tonnage of beef marketed, and with the industry having already culled significantly because of the drought, it does not have the cattle needed to supply this demand. This is combined with taking fed cattle to unheard of slaughter weights by finishing them to endpoints fatter than we have seen since the 1950s, which has resulted in the industry having excess tallow to grind with lean.
The bottom line is we will need to import lean to meet ground beef demand and make best use of the excess tallow. One of the other main uses for the tallow is making bio-diesel, which is about as energetically inefficient as you can get and can only exist if highly subsidized.
The profitability of importing the lean needed will depend on the trade policies of the current administration, and particularly on how the situation with tariffs shake out. At the time this article was written, the situation with tariffs is far from settled. At this point, the tariffs for New Zealand and Australia seem fairly settled and reasonable, however, other major beef producing countries like Brazil are being threatened with tariffs as high as 50%.
The U.S. is also reliant on exports to remain profitable. Our industry not only exports some of our highest quality cuts like middle meats, we are highly dependent on the export market to purchase things like organ meats, tripe and hides. The value created through the export of these byproducts is often the difference in a packer making or losing money. The problem that has occurred in the past is when the U.S. has put tariffs on other countries’ products, they often retaliate with tariffs against our agriculture products.
Politics
President Dondald Trump is actively using tariffs to achieve his trade goals. However, access to the president is not universal and those advisers who have his ear can have a large amount of influence. Trump himself seems to be very sympathetic to agriculture, but has no agricultural experience. Agriculture Secretary Brooke Rollins—unlike most who have held that position—appears to have access to the president, which is good for agriculture. Rollins is definitely a friend of agriculture; she grew up in rural Texas and understands rural values, which includes being an active 4-H member.
Two wild cards in the administration who seem to have Trump’s ear are Stephen Miller, White House deputy chief of staff for policy and the U.S. Department of Homeland Security adviser, and Robert F. Kennedy Jr., secretary of the Department of Health and Human Services. Neither Miller nor Kennedy have any business or production agriculture experience, but are in positions to greatly impact our industry.
Miller is a Santa Monica, CA, native who is an ideologue, and it is thought he would deport all illegal immigrants, even those that have been here for decades and serve as the backbone of our agricultural labor force. In general, this part of the workforce would have papers and a Social Security number, but ones that might not always hold up to close scrutiny.
Kennedy promised he would run the Department of Health and Human Services using “gold standard” science. However, it appears his definition of gold standard science is that which agrees with his preconceived notions. Although not directly under his umbrella, he has a high degree of interest in agriculture policy, and ultimately, he is not a friend of conventional agriculture or animal agriculture.
The beef complex
The good news is the demand for beef is excellent. Our cow herd has become largely Angus based, which has improved the marbling and quality of U.S. beef. Angus with its “supply the brand” rallying cry has become a breed with tremendous growth and carcass quality. Research from the USDA Agricultural Research Service Meat Animal Research Center in Clay Center, NE, has identified Angus as having the largest average mature weight of any breed, making them capable of producing the large carcasses that are bridging the tonnage shortage being experienced due to being short on cow numbers.
Angus also have a high propensity for putting on external fat. As research from Oklahoma State University from as early as the late 1980s demonstrated, this extra fat from the end of the feeding period ends up on the rail, so producers get paid for the extra weight. This is despite it having to be cut back off in the fabrication line, but with value-based grids now slanted towards quality and away from yield grade, these longer fed cattle have paid.
However, other problems have arisen with this focus on the feedlot and carcass endpoint. The side effect is many commercial cow-calf producers are ending up with very large cows whose maintenance requirements too often exceed their environment and feed resources. This can result in less-than-desirable reproduction and longevity.
Still, if an operation has the feed density and quality, they should be running larger cows to produce the size carcasses the industry desires. However, under more extensive conditions with sparser pastures and/or lower quality feeds, cow size needs to be moderated. Otherwise, the cow herd’s genetics for production will not be expressed in calf payweights, but the expense of keeping the cows will increase.
Beef-on-dairy influence
One of the big topics in the beef industry is the growth of the beef-on-dairy segment. This is a boogeyman to many beef producers, but it shouldn’t be. Fifty years ago, the veal industry was an $873 million market that was almost all-crate managed dairy calves, fed a liquid diet producing what was referred to by many as white veal due to its pale color. Today, the veal market has declined to $45 million in annual sales, just 5% of what it once was. It is also almost all now pink veal from both dairy and early weaned beef calves.
It takes on more color because the use of crates has disappeared, and the calves can now move around and their ration includes both milk and dry feed. Fluid milk sales have also been declining for close to 50 years, as have the number of dairy cows, until they plateaued about 10 years ago.
The bottom line is the veal market has been dead for a long time, and the dairy bull calves and excess heifers from the much smaller number of dairy cows have long since moved into the feedlot industry. The only difference now is there is sexed semen, which frees up a percentage of the dairy cows to be bred to beef bulls to improve their conformation and make them black, so they are eligible for Angus product lines. However, the amount of bunk space they take up has changed little. For context, this was something the industry has been striving for at least back to when famous quantitative geneticist Dr. Jay Lush received his Ph.D. from University of Wisconsin in 1922 with his dissertation research being trying unsuccessfully to sex semen.
In many ways, the beef industry is in uncharted waters. Without a doubt, commercial cow-calf producers appear to be in the driver’s seat, and should remain profitable for an extended period of time. However, this beef cycle is not reacting like those in the past, and it is almost certain that we will come out of this cycle as a smaller industry than when we went in. Wherever we end up for the size of our industry, we have won consumers back through producing a high-quality product, which is the most important thing.
