The July Cattle biannual inventory report was released in late July, and to no one’s surprise, showed the smallest cow herd on record. Keep in mind, USDA did not release a report in 2024, so comparison numbers date back to 2023. That being said, the bigger surprise to many is that USDA only thinks the U.S. cow herd has declined by 1.3% in that time frame. Additionally, from obvious math, this shows there will be an even smaller calf crop to market this year.
Moving over to the Cattle on Feed Report released the same day, this showed the lowest total number of cattle on feed since 1996 with 11.1 million estimated head. The biggest surprises outside of analyst expectations showed an 8% reduction in cattle placed on feed. This was 6% more than the estimated 2% reduction. Placements in feedlots totaled 1.44 million head, representing the lowest placed numbers in 16 years. Notably, some states showed a huge reduction in placements like Texas (82%), Oklahoma (73%) and Nebraska (87%). Most people can assume the southern border’s closure is playing a major factor in this.
There is slight expansion going on in the dairy sector as economic pressures to retain and build females for milk production has increased. Beef-on-dairy calf marketings have showed some signs of a decrease as dairymen are increasing matings to build more replacement females to go back into production.
According to Derrell Peel at Oklahoma State University, looking at heifer numbers is critical in estimating future production of the cow herd. Currently, heifers account for 38% of total cattle on feed. This is significant as it represents herd retention and expansion numbers. Dating back to 2015-17 when quick retention happened following the market surge of 2014, heifer numbers were in the low 30 percentages. Simply put, replacement candidates are being marketed and sold into the feeding sector. Herd expansion is very slow at this point and looks to continue this trend over the next year at least.
What we don’t know for sure is the number of operations that have exited the industry over the last few years. From 2016-23, major drought and a surge in inputs with a market that couldn’t keep up created a tumultuous time to be in the cow-calf sector. Today, the economic incentive this market is creating is giving producers the opportunity to exit the business at an all-time high. Continued dispersions are happening. Heifers are continuing to be marketed. The national cow herd has not begun to rebuild.
I am writing this column from an office at the Superior Livestock Auction’s Video Royale sale in Winnemucca, NV. The numbers appear to be an obvious response to marketing conditions. The Cattle on Feed report indicates that cattle are being pulled forward in all sectors. Looking through the offerings, many cattle that were normally marketed later in summer have already been sold and contracted in every video sale company as well as marketed across the nation. Capturing a guaranteed market makes a lot of sense from an operator standpoint, but it has created a supply and demand issue in a market that has continued to get higher and higher.
Consumer demand, at this point, has continued to stay strong through recent years even with inflation levels. There will be a breaking point when the consumer starts to push back and purchase other protein sources, but we haven’t hit that point; albeit, we are getting close, in my opinion.
Additionally, the feeding sector is poised to have another great year of feeding. Bumper crops across many of the row crop states have feedstuffs at very affordable levels. Rumors of 1,800-pound fat cattle are losing their shock value as this will most likely continue to become more and more normal. Carcass weights look to continue to increase as production will be needed to maintain, especially as the Trump administration goes back and forth with Brazil on tariffs. This has created a whiplash where production is double a year ago, but those same plants are facing closure today. Blends at the packer level look to face some economic pressure over the next few months, and shelf product will have the consumer facing even more increases in beef prices above last year’s 8% price increase.
A smaller national cow herd is going to face more pressure to produce more meat yield on smaller numbers to not only feed our nation, but many nations. Lower interest rates are around the corner and it’s going to shake up the real estate world. Urban sprawl isn’t stopping, and so production acres will face more and more pressure to maximize output. The genetics in our cattle today will put more pressure on them to grow faster, convert on lower feed input and grade at a high level. Without a doubt, we are entering a new realm. Even if this market was to correct, or correct multiple times, there will be a demand level on a smaller cow herd for the foreseeable future that will keep cow-calf production in profitable levels. — LOGAN IPSEN
