We were at CattleCon 2025 in San Antonio, Texas, where we hosted Cattle Chats featuring Dave Weaber, a beef analyst with Terrain™, an industry insights service we provide to our customers. Rod Alt with Capital Farm Credit joined Dave for a conversation about rebuilding the U.S. cattle herd. Below are excerpts from one of their Cattle Chats.
Forecast for Rebuilding Beef Herd
Rod: If we look at where the industry is, where beef prices are, is the forecast longer or shorter for a possible rebuild?
Dave: I have spent the past year travelling to most all of the Central Plains. It is hard to sit in a room and find more than two producers who will admit to having more females on the ranch this year than they had last year.
If we look at Texas and Oklahoma, the top two cow states, there are 108,000 more cows January 1, 2025, than in 2024.
The problem is when we look at the beef replacement numbers for Texas, beef cows were up 60,000 out of 4 million beef cows. So less than 1%. Beef replacement heifers expected to calve next year, down 60,000. So, when we get to January 1, 2026, what does that mean for the beef cow inventory in Texas? Even with where it was last year. There’s nothing happening there.
That story goes on and on across the country. Colorado is down. Missouri is down. Montana, North Dakota, South Dakota, Kansas, Nebraska. Go up and down the Central Plains. Half the cows live in those states and there is no net growth.
The cure for high prices is high prices, and we just haven’t seen any response within the cow-calf segment to get going on the expansion. We tried last year. There were a bunch of ranchers who kept beef replacement heifers back to do a little speculative growing of heifers. They didn’t need them. They thought their neighbors might. Well, some even got the bulls bought. And some didn't get the bulls bought before they turned around and sold the heifer calves. Remember last January, the big run up in feeder cattle and calf prices. Those guys wanted to make $200, $250 putting $1,000 in there to get her where she was going to be bred and ready to calve this past spring, and they made $400 to $500 selling them to the feeders. I think we may be in the middle of doing that again.
Things on the horizon that probably are headwinds more than tailwinds: If you are south of Interstate 70, it looks like drought is coming. The moisture we've had this late winter is probably going to be what we get to work with. There is going to be a lot more have nots in this country than haves.
Watch the update on beef cattle production and price cycles, an exploration of headwinds to growing the breeding herd and implications for producer profitability by segment. Record prices don’t mean record profits for every segment, but they do mean record risk levels and a greater need for risk management planning and strategy.
Speakers: Dave Weaber, Terrain™ and Rod Alt, Capital Farm Credit
Profitability in the Beef Industry
Rod: The good thing about it is if we look at the numbers and what we forecast, over the last three years we’ve seen some profitability return to the industry.
Dave: Absolutely. What are you seeing on balance sheets? Is this lack of growth partly a financial decision?
Rod: It's all over the board. But for the most part, profits have led to the deleveraging of the balance sheet.
The cow-calf sector has had three great years. The stocker operators are probably coming off their best three years; this year may be a little bit iffy. And from a feedyard perspective, it's all about the risk management strategy is – if you’re fully hedged or not.
Profitability is all over the board. But for the most part, everything is in better shape – a lot more deleveraging, a lot more liquidity.
Dave: I see a few more hay piles around. One of our Terrain analysts did some work on the hay inventory report and tons available per cow in inventory. That has recovered a fair bit. But I’d say if you are south of I-70 and don't have two years of hay in the yards, figure out a way to get it. We’re probably going to need that. And that deleveraging of the balance sheet is going to maybe help facilitate a little bit of that.
Selling heifer calves is the number one way to fix the revenue side of a ranch. Bull calves or steer calves always are going to go to the sale barn. But that flex on selling those extra females in this kind of marketplace sure makes the balance sheet look better.
Consumer Spending: How High is Too High?
Rod: As we think about prices, there is going to be an impact to consumers.
Dave: Absolutely. When you look at consumer beef spending in 2024, it was up about 5.5% year over year. That doesn't sound like a big change. But when we take all fresh-retail-beef prices at $8.18 average in November and look at what we did compared to a year ago, that is an $11.5 billion increase into the system.
Anybody ever go to the coffee shop and somebody there said, All these retailers need the lower beef prices. Anybody hear that? If you do, make sure they call me because I’ve got a lesson for them: Those dollars come into our business from one place, and it is from consumers. And they are willing to pay more for our product today than they ever have been. That's a great thing.
Someday they are going to flinch and say, enough is enough. As an economist, I look back at historical price trends and what has happened. We're about $2 past the point when they should have given up.
That says something is different. And the product is different. There is more prime in the mix, there's more upper two-third choice and it is available to everybody. Everybody has figured out how to cook a restaurant quality steak at home. I've got a 17-year-old son who can butter baste a ribeye steak and fry it up in a cast iron pan, and it is as good as just about anybody’s. And guess where he learned to do that? On TikTok. But if he can do it, you can do it.
Rod: That's the way of the future.
Dave: And I'm trying to get there. But it is all good. We have seen an increase in value of about $526 a head this year vs. last year – just based on the change in consumer spending.
Rod: The industry has spent a lot of years trying to improve palatability, taste, whatever you want to call it. Now we have it, and it is showing up in the meat case and consumer demand.
Will Rebuilding Lead to Lower Prices?
Rod: If we go back to why we are talking – Will rebuilding the herd lead to lower prices? – my view is it will be tough to go back to lower prices based on what we have seen.
Dave: We have to get beef production smaller before we make it bigger. If females that are part of the feeding stream today are pulled out of the beef supply chain that is price inflationary for the feeder cattle and calf supply. And we’re down almost 2% year over year on feeder cattle and calf supplies outside of feed yards today. And we haven't done any herd expansion.
I've been doing a little math. If we want to keep per capita supplies even with where they were the last five years, we need about 2.5 million more cows over the next five years. Actually, we need them like tomorrow. And they're not coming. So, prices are going to go up more and incentivize that because the cure for high prices is high prices.
Somewhere we have to come up with 2.5 million more cows, and there's only one place to come from and that’s from the feeding stream. When I was a kid, I used to think the default location for a cow or heifer was on a ranch. It's not. The default position is in a feedyard. Cow-calf guys have got to buy her back from the feedyard and that price tag is getting bigger and bigger.
If these calves have two ears and a tail, they are worth $2,000. I wouldn’t be surprised to see beef-replacement heifers cost $4,000.
If you run the net present value of her production and start today, she looks pretty good. If we start two years from now, it's a whole different equation because you missed the two highest calf price markets in the system.
If you are going to expand, do it early, don’t do it late.
Nobody has asked, but I’ll throw this out there: What does extra carcass weight mean in terms of offset headcount? About 40 pounds year over year increase in carcass weights for steers and heifers vs. a year ago is like adding 21,000 head a week to the kill. If you do rule of thumb, every 10 pounds of carcass weight is 5,000 head offsetting the kill.
That’s great when you are doing ground beef math because ground beef production is in pounds. It’s a different challenge when you think about the middle meat items, steak in particular – strips, ribeyes and tenderloins. We don’t typically sell those at a restaurant by the pound. Or even at the grocery or retailer. They sell three-packs for a reason. How many three packs feed a family of four? Two.
When you start thinking about the piece-count problem, that is the challenge: Where do we get the extra head to go through the system?
