The U.S. beef cattle industry is smaller than needed and signals for rebuilding will continue in the coming months. But herd rebuilding is likely to be slow to start and proceed quite slowly initially. So says Oklahoma State University’s Derrell Peel in his latest analysis of the prospects for herd expansion.
Meanwhile, a CoBank report says rebuilding the herd could take years as market conditions encourage ranchers to sell off rather than keep their young cattle. Although pasture conditions and feed costs are improving, there are still financial upsides for producers to send their beef calves and heifers to feedlots rather than raise them, it says.
Coming into 2024, the beef cow herd was at a 63-year low, the smallest beef cow inventory since 1961, Peel says. This has pushed cattle prices to record levels through 2023 and 2024. Yet there are no indications that any beef herd rebuilding is underway. The question of rebuilding the beef cow inventory is fundamental for cattle markets in the next few years, he says.
A review of historical herd expansions is instructive, Peel says. From 1990 to 1996, the beef cow herd increased by 2.864 million head. From 2014-2020, the herd increased less, by 2.734 million head, in one less year but faster. The herd increased by 1.2 million head in just two years from 2014-16. One of the keys to herd expansion is heifer retention, he says.
Beef replacement inventories increased three of four years prior to the beginning of herd expansion in 1991 and for three years prior to herd expansion in 2015. Both expansions included one year of very large heifer retention (year three in 1993 and year two in 2015), with smaller increases before and after, he says.
The industry does not yet have a zero year (low inventory) from which herd rebuilding can begin, Peel says. Beef cow slaughter thus far in 2024 is sharply lower, down nearly 16% year over year. But this level of beef cow slaughter, combined with the low beef replacement heifer inventory in 2024, implies that the beef cow herd continues to liquidate by another 0.5-1% in 2024. Beef cow slaughter would have to drop by roughly 22% year over year to avoid additional liquidation this year.
The current rate of beef cow slaughter indicates a herd culling rate in excess of 10% this year. The culling rate is expected to drop below 10% during herd expansion. Thus 2025 is the earliest zero year for the next expansion to begin. But there is no certainty that additional liquidation will not occur in 2025, he says.
Liquidation of beef replacement heifer inventories in recent years means there is no pipeline or momentum for herd expansion compared to previous expansions, Peel says. Moreover, the level of heifer slaughter and heifers in feedlots in 2024 suggests that the replacement heifer inventory in 2025 is likely to show modest growth at best. Forecasts show a 2% year-over-year increase in beef replacement heifers in 2025.
At that level, the beef cow herd is limited to stable numbers or a very minimal increase in 2025, he says. Beyond 2025, heifer retention could increase more and accelerate herd expansion beginning in 2026. But current conditions do not suggest a high likelihood of sharply accelerating heifer retention anytime soon.
The threat of continuing/redeveloping drought is one factor limiting the beginning of herd expansion at the current time, Peel says. Should developing drought conditions become a reality in the coming months with the return of La Niña, additional herd liquidation is likely. Any herd rebuilding could be pushed off further into the future, he says.
Some top analysts are expecting herd numbers to return to 2023 levels in the next three to four years if market conditions persist, while others believe cattle contraction will continue through 2027, says CoBank analyst Abbi Prins in a research brief. The duration of the latest beef cow decline has raised concerns for large companies and beef stakeholders, says the brief. The number of U.S. beef cows have retracted over the past five years to its lowest point since 1961 at 28.2 million head, according to USDA.
Widespread drought played a large role in the cattle squeeze, Prins says. The severely dry conditions damaged pastures and lowered hay supplies as market factors drove up prices for cows, feed and inputs. While more favorable weather has improved forage production this year and feed costs begin to come down, cattle prices remain strong, incentivizing ranchers to continue selling their animals, Prins says.
Right now, it is not worth the risk to hold on to heifers as the potential upside of selling the calf has an immediate pay off, Prins says, noting a $300 upside to sell rather than raise calves. Should cattle prices stay strong, CoBank estimates it could be 2026 or 2027 before heifer retention rates and the beef cow population pick up. — 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.)
