U.S. cattle herd hits new lows as decline extends into sixth year

The U.S. cattle herd fell for the sixth consecutive year, totaling 86.16 million head on January 1, 2026. This is 320,000 head below 2025 levels and 8.64 million head reduction since the 2019 cyclical peak. Breaking this down further, the beef cow herd contracted by 280,000 head to 27.61 million, a somewhat surprising development given relatively low cow slaughter rates.

Heifer retention increased by 40,000 head. However, a few more retained heifers in 2026 does not necessarily signal a larger calf crop in 2027. Most of these heifers will not calve until at least 2027, and it is still too early to assume meaningful herd expansion or a noticeable uptick in calf numbers next year. Notably, heifers as a share of cattle on feed are already higher than in 2025. However, if heifer retention does increase, those animals are pulled out of the feedyard supply, which would tighten the fed cattle inventory and support higher prices in the near term. Accordingly, 2027 may mark the early stages of herd expansion at the earliest.

The threat of New World screwworm continues to move steadily closer to the U.S. border. In response to ongoing detections in northern Mexico, all southern U.S. ports of entry remain closed to live cattle imports since July 1. USDA unveiled a plan to release sterile New World screwworm flies in Texas and along key regions of northern Mexico to help prevent further spread of the pest. Because female screwworm flies mate only once in their lifetime, releasing sterile males reduces the number of viable offspring in subsequent generations, gradually suppressing the population and slowing its northward movement.

In the western U.S., the beef cattle herd remained relatively stable year over year. Beef cattle supplies, which considers all cattle and calves, not including milk cows that calved or milk cow replacements (a proxy for the beef cattle herd), saw a reduction of 1.3% in the region. California and Idaho posted only slight declines, with Idaho down roughly 20,000 head (-1.3%) and California down about 10,000 head (-0.4%) compared to 2025. Montana and Oregon also recorded modest decreases of about 21,000 (-1.0%) and 24,000 (-2.2%) head, respectively. Washington was the only state to see an increase, adding approximately 20,000 (+2.7%) beef cattle in the past year. Arizona saw a notable decline of 56,000 (-9.2%) head, likely driven by ongoing drought conditions.

Although the latest report offered a few surprises, the national herd remains historically small. These tight supplies are expected to continue to support strong cattle prices for cow-calf producers. However, rising production costs remain a substantial concern. Over the past five years, operating costs for Western cow-calf operations have risen an average of 17.5%, while total production expenses have climbed 22.8%. Even with record prices, producers should closely manage costs.

Packer profitability has been under significant pressure, with beef packers operating at slim or negative margins since September 2024. Packer profitability has been impacted by expense of purchasing cattle as well as reduced plant utilization. Trade policy uncertainty, particularly surrounding tariffs, has added further strain. Current breakeven prices on an 800lb steer are estimated near $2.59 per lb for fats, while market fats are closer to $2.35 per lb, meaning today’s cattle are being fed at a loss. Although prior-yearyear cattle were profitable, some packers appear to be taking on substantial risk in hopes of better margins in 2026 and 2027.

Profitability

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

Tight calf supplies and robust demand have intensified competition for feeder cattle. Profitability is expected to remain resilient, supported by cost-of-gain efficiencies and strong box beef prices.

Historically tight cattle inventories, limited availability of replacement heifers, and firm calf prices continue to underpin profitability for cow-calf operations.