Cattle markets rebound and herd expansion efforts taking place

The sustained decline in cattle on feed inventory, coupled with a reduced percentage of heifers on feed, signals potential herd expansion efforts, though economic pressures may slow the pace of rebuilding overall herd numbers. As of April 1, cattle in feedlots with more than 1,000 head were down 1.6% compared to the previous year, marking the fifth consecutive decline. Notably, the percentage of heifers on feed reached its lowest level in five years. This decline in the proportion of heifers indicates more heifers are being retained rather than being sent to feedlots. Historically, such trends have been associated with efforts to expand herds; if this is the case, herd expansion will likely happen very slowly. Producers are facing higher interest expense, input costs, and volatile market conditions that may deter producers from making large-scale commitments to herd expansion. These factors will likely slow the rate at which the beef industry is able to rebuild overall herd numbers.

Cattle markets responded quickly to the tariff announcement made in early April, resulting in heightened volatility across futures markets. Initially, the news elicited a bearish reaction. Cattle future prices tumbled until the news of a 90 day pause. Approximately 14% of U.S. beef and beef products were exported in 2024, with key destinations including South Korea, Japan, China, Mexico, and Canada. These markets play a vital role in supporting the U.S. beef industry. While futures prices have returned to all-time contract highs, it underscores that strong and sustained consumer demand, both at home and abroad, is crucial for maintaining record cattle and beef prices.

Profitability

March 12, 2025

Cattle feeders: Profitable - Bearish 12-month outlook
Cow-calf producers: Profitable - Neutral 12-month outlook

As feedlots grapple with tightening cattle supplies, competition may continue to ratchet the cost of feeder cattle higher. This could offset the financial benefit of lower feed costs.

Low national cattle inventories continue to bolster cow-calf profitability. However, already tight packer margins could weigh on cattle prices if rising beef prices outpace consumer demand.