The rebuilding of the U.S. beef herd has scarcely begun, according to USDA’s annual Cattle inventory report. Beef cows on Jan. 1 totaled 27.607 million head, down 1% from a year ago. Beef replacement heifers on Jan. 1 totaled 4.714 million head, up 0.9% from a year ago. The only meaningful year-on-year increase in cattle numbers came in the number of milk cows, which was up 2% on a year earlier. All other categories of cattle were flat with 2024 or slightly lower. All cattle and calves as of Jan. 1 totaled 86.155 million head, 99.6% of a year earlier.
Uncertainty around U.S. processing capacity is raising fresh questions about whether large-scale heifer retention is even necessary as the industry looks toward rebuilding the cow herd, noted a report from RFD-TV News in Lubbock, TX, on Feb. 4. Recent plant closures and production cutbacks suggest slaughter capacity may shrink before expansion efforts fully begin.
According to an analysis from Don Close of Terrain, Tyson Foods’ decision to close its Lexington, NE, beef plant and reduce production at its Amarillo, TX, facility (both on Jan. 20) has altered the balance between fed cattle supplies and slaughter capacity. With fewer cattle needed by packers, feedyards may be able to meet demand using existing inventories, reducing the need to bid aggressively for feeder cattle, he told RFD.
USDA data continues to show that heifer retention has not meaningfully started, Close said. Heifers on feed remained flat through the third quarter of 2025, confirming that producers have not yet shifted toward herd rebuilding. At the same time, years of cow liquidation across both the beef and dairy sectors have left an aging herd with limited replacement depth. Close warned that further reductions in processing capacity could discourage expansion, locking the industry into tighter supplies and slower recovery.
As noted, numbers in most cattle categories on Jan. 1 were flat with a year earlier. USDA estimated the 2025 calf crop at 32.9 million head, down 2% from the previous year’s calf crop. Calves born during the first half of 2025 were estimated at 24.2 million head, down 2% from the first half of 2024. Calves born during the second half of 2025 were estimated at 8.70 million head, 26% of the total 2025 calf crop.
Tight cattle supplies caused Tyson Foods’ beef segment to have an operating loss of $319 million in Tyson’s 2026 first quarter ended Dec. 27, compared to a $26 million operating loss in 2025’s first quarter. Tight feedlot supplies also helped cash live cattle price surge from late January well into February. Live prices averaged an all-time record of $246.91/cwt the week ended Feb. 22, while dressed prices averaged a record $387.95/cwt.
Meanwhile, strong U.S. beef demand continues to be the biggest surprise of 2025 and now into 2026. The industry has just entered its second weakest demand month of the year. But consumers got minor relief on beef prices in January as retail prices fell somewhat from December. USDA’s All Fresh Beef price averaged $9.47 per pound, down 8 cents from the month before. The Choice price averaged $9.93/lb., down 15 cents from the prior month. But the prices were still up 16.2% and 16.4%, respectively, from January 2025. February retail beef prices are expected to print lower again, as February is the weakest demand month of the year for beef. The industry cannot expect much relief this month either.
The beef product market has yet to respond to the reduced levels of production, suggesting that the current levels are not low enough to stimulate interest and will need to move even lower, says Bob Wilson of HedgersEdge.com. While the last four weeks saw cash live cattle prices advance over 6.5%, the Choice cutout was up less than 2%. The average retail beef price fell in January from the previous month as consumers adjusted their purchases for the uncertainty they feel. As the song lyrics say, “Someone’s going to have to explain it to me.” This type of economic environment is not sustainable, he says.
Wilson made his comments the week before last, which saw the national comprehensive cutout (cuts, grinds and trim) increase $0.25/cwt from the prior week. The slaughter total the week before last was an estimated 516,000 head, and this pushed up daily boxed beef prices sharply higher the first three days of last week. The Choice cutout gained $12.53/cwt while the Select cutout gained $6.33/cwt. Fed cattle meanwhile continue to reflect their long-fed status through near-record carcass weights and grading. For the week ended Feb. 14, they graded a combined 87.70%, second only to the 87.72% set the week ended Jan. 24 this year. — Steve Kay, WLJ columnist
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
