Over the last two weeks, between Superior Livestock Auction and Western Video Market, there were nearly 500,000 head sold that garnered close to $1.1 billion in revenue. It’s hard to fathom the levels we saw over the last two weeks, but is ultimately rewarding to see how the cow-calf, stocker and yearling producers were able to time this market through the highest peaks we’ve seen to date.
Throughout both sales, calves were bringing in the low-to-mid $2,000s, while yearlings were hovering in the high $2,000s to low $3,000s. Timing in the marketplace, especially during the Superior sale, surged when the southern border was shut down once again due to the New World screwworm being reported just over 370 miles from the Texas border. The five-week plan to reopen ports along the border was immediately halted and the cattle waiting to come across the border will have to wait even longer. The already tight supplies, coupled with a 50% tariff threat on imported beef from Brazil recently by the Trump administration, pushed the cattle market into an even higher realm not yet seen before.
Over the last several years, every headline coming out regarding inventory levels has shown the drastic decline in national cow numbers. The consensus among the industry’s analysts claims that once herd rebuilding gets underway, the unlikely scenario that the national cow herd levels will return to the previous peak we saw a decade ago. This isn’t a new trend. As cow herd cycles go, when a shortage in our industry has happened, original levels aren’t realized, and the trend continues a downward trajectory.
While in Chicago last week at the National Auction Association’s annual convention, CattleFax Chief Operating Officer Mike Murphy gave an excellent presentation on cow numbers, feeder prices, commodity values and how this all ties back to real estate values. In this, the discussion quickly talked about cow numbers and herd rebuilding. Audience participation echoed the sentiment that so many smaller producers as well as producers at retirement age have taken the opportunity to liquidate. Unfortunately, this is a case that we cannot deny from an industry perspective.
Economic pressure on several fronts has opened the door to continued liquidation despite the record market levels we are seeing today. Referencing generalized trends from Murphy’s presentation, national agriculture real estate values were steady from 2014 to 2020, but since then have seen a huge surge, nearing 70% increase in values in different areas like grazing and farming lands. This is also despite lending interest rates and high inflation in the same time frame. Major population areas across the east and southern Plains are seeing urban sprawl take out a lot of productive acres at a more rapid pace than has been seen in years past. The pressure to increase yields off fewer acres is only mounting. This trend won’t be going away anytime soon.
Simply put, there is a strong financial incentive for producers to make bold decisions in this market, which is ultimately to keep cow herd levels low and continue to push out higher market levels for an extended period. The added revenue for producers to offer up their entire heifer calf crop is a strong pressure, and from what the WLJ staff is seeing at these auctions, there are a lot of ranches offering up their entire calf crop for sale this year. We don’t look to see replacement numbers surge anytime soon.
It’s an interesting time we are in, for sure. However, we have to approach this with some fundamental thinking. One topic to note that gets a lot of producers’ intrigue is surrounding succession planning. CattleFax predicts that the generational wealth being held in the baby boomer generation that will need to be dispersed in the next few decades ranges between $5 trillion and $7 trillion. This information, specifically thinking about the One Big Beautiful Bill that the Trump administration passed last month, provides a lot more opportunity for this wealth to reach individual’s pockets instead of the governments. It was a win for agriculture.
The administration has also been going public with their frustration with Fed Chair Jerome Powell not lowering interest rates at a quicker pace. Most economic indicators are showing the opportunity for this to happen, so we predict we will see multiple rate decreases within the year. This adds to a surmounting number of factors that paint a pretty picture for the producer levels in livestock production.
We encourage people to make sound decisions and plan financially for the future. Undoubtedly, we are in good times, but there is a cycle to everything we do. Plan ahead, not just for next year, but for the next several years and even the next generation. We are in an opportunistic time, so let’s be smart about it. — LOGAN IPSEN
