THE United States beef industry may not see breeding cow numbers return even to 2023 levels for another three to four years, as high prices for young cattle incentivise breeders to sell, rather than retain females for herd rebuilding.
That’s the view of specialist US agricultural lender CoBank in a report released this month, pointing to the significant impact that decisions made by smaller US beef producers (running 50 head or less) have on national herd performance.
“America’s beef supply relies heavily on a large network of small producers to raise calves,” CoBank’s report said.
“In fact, 25 percent of the US beef cow inventory can be found on operations with 50 or fewer head. Since these operations generally do not rely on these animals as a sole source of income, economic decisions do vary from larger operations,” it said.
When unexpected events such as widespread drought damage pasture conditions, forage production and beef cow retention rates suffer, the report said. Drought is one of the primary reasons the number of US cows producing calves has declined in recent years. This was not unusual, as animal inventories continuously cycle through expansion and contraction phases.
However, the length and depth of the decline for US beef cow numbers had been surprising, if not concerning, CoBank said.
“The US is currently in its fifth year of retracting beef cow numbers, falling another 2.5pc year-over-year to 28.2 million head. Historically speaking, these inventories are the lowest seen since 1961, based on USDA data.
“And some of the top analysts in the industry do not expect the beef-cow sector to return to 2023 levels for three to four more years. Some are even suggesting contraction will continue two more years beyond that,” it said.
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Pasture conditions are rebounding
Weather plays a vital role in both forage quality and quantity, important to note as pasture and feed costs make up 50pc of the expense portion in most US livestock budgets, CoBank said.
After persistent drought conditions took root in 2021 and 2022 in US states with the highest beef cow populations, relief arrived in 2024.
“As spring and summer grazing began this year, all regions have shown positive changes in pasture conditions. The situation has also improved in the Texas counties with the largest inventory of beef cows in 2024, with no drought reported by the US Drought Monitor,” the report said.
With US hay prices softening in 2024 compared to the start of the pandemic, cow-calf operators could start rebuilding their winter feed supply once they have recovered financially from expensive hay costs in recent years. These prices are still considerably higher than during the previous US herd rebuilding cycle from 2014 to 2019, however if there was not enough hay to feed the current herd or additional replacement heifers, US producers will not hold on to heifers to start rebuilding their herds, CoBank said.
Does keeping heifers make financial sense for US producers?
When it comes to US cow-calf operations, a financial analysis helps determine if a producer will make a better margin from keeping a calf or selling it, CoBank said.
“Softening feed prices have improved incentives to retain heifers, however US beef calf prices are at record high. These unique market conditions mean it’s a no-brainer decision for some cow-calf operators to sell new crop calves for immediate cash flow,” it said.
According to the US Livestock Marketing Information Centre and USDA, average prices so far in 2024 for 550-pound (250kg) Kansas heifers were US$276 per cwt and $314 per cwt for steers. If a weaned calf is priced at $294 per cwt at 550 pounds, it could be sold for $1617 to be finished at a feedlot, CoBank suggested.
So what’s the other side of this decision tree?
The following values were a general approximation, CoBank said, as every US cow-calf operation was different.
Accounting for operational costs, raising that heifer for one year could cost US$1315, or +$2600 for the two years before she has her first calf, according to the Kansas State University Beef Cow-Calf Budget. Average purchase prices of a bred heifer in 2024 ranged from US$1500 to $2600 per head in Kansas, Missouri, Nebraska, Oklahoma, and Texas.
This data analysis suggested a US$300 upside for producers to sell calves rather than raise them when only comparing the market sale and first year expenses, CoBank suggested.
“Right now, it’s not worth the risk to hold onto the heifers as the potential upside of selling the calf has immediate pay off,” it said.
US beef prices to drive retention narrative
Should US steer and heifer calf prices remain record strong, it could be 2026 or 2027 before heifer retention rates and the beef cow population tick back up, CoBank said.
The July USDA Cattle on Feed report noted that heifers encompassed 39.6pc of cattle on feed, showing that cow-calf producers are continuing to sell more calves to feedyards after replacing cull cows – even after accounting for improving pasture conditions.
“Even when ranchers start keeping more heifers, rebuilding the US beef cow herd will be a slow roll,” it said.
“For example, it will be 2026 before a heifer calf born in 2024 has her first calf and joins the beef-cow population. However, it’s more likely 2025 or beyond will be the first year of retention.”
Fewer cattle entering US processing plants will lead to continued high beef and cattle prices for cow-calf and feedlot owners, and tighter packer margins. According to the Sterling Beef Profit Tracker, US beef processors were losing close to $100 per head in July 2024.
“This spiral will end at some point, because even if cattle prices continue to skyrocket, the number of animals available to be sold is finite,” CoBank said.
“Overall, after a couple of tough years with poor weather impacting forage production and interest rates now bumping 8pc, it is critical for producers to have cash flow to pay down debt and build up feed inventories before adding to the US herd.
“Once the herd does start rebuilding, a drastic change in beef cow numbers is unlikely, as the growth could look more like a slight bump in cow inventory.”
2026 before things start to improve, JBS says
Major US beef processor JBS touched on the state of the US beef herd and prospects for rebuilding during an investor analysts’ briefing last week.
Responding to a question about when the US beef cycle was likely to bottom, JBS US division chief executive Wesley Batista said his company was ‘pretty optimistic’ about the beginning of the herd retention in the US.
“We see slaughter coming down 15 percent year-over-year. We think that that’s a huge sign of the retention starting. The moment that’s very important for us to watch out for is going to be this fall (northern hemisphere autumn, starting 22 September), and we’re going to see what happens.
“But I think that 2025 will be a similar year for US beef to 2024. And if nothing changes weather wise, we’re probably going to see somewhere in 2026 things changing, regarding cattle supply,” he said.
Facing skyrocketing cattle prices due to supply shortage, JBS’s US beef division in its second quarter ended 30 June, saw adjusted pre-tax earnings down 67pc year on year, to US$29 million. In the quarter, beef margins in North America continued to be pressured by both the cattle cycle and weaker demand given the inflationary scenario in the US, investors were told. According to data released by the USDA, cattle prices remained at high levels, growing 5pc during the second quarter.
Therefore, as the price of cattle currently represents about 85pc of the cost of the goods sold in the US beef division, and the selling price of meat remained stable compared with the same quarter last year, profitability came under pressure in the period, shareholders were told.
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