Cattle Prices Expected to Remain Strong

"It's hard to not enjoy these prices," Kansas rancher Matt Perrier says. "But, based on past experiences, I think we are all cautiously optimistic as to where we are headed."

Many in the beef industry expected the cow herd to build back after seeing numbers shrink, the result of producers cutting numbers because of the shortage of forage from drought. However, that hasn't happened.

The U.S. cow herd continues to shrink and is at the lowest level in 84 years, according to the USDA National Agricultural Statistics Service's Jan. 1, 2025 numbers, with 37.2 million head. The 1941 inventory was 36.8 million head. The decline, which started due to widespread drought in 2021, has continued thanks to continual dry weather, wildfires and record fed cattle prices averaging $65 more per cwt, at $187 at the end of 2024, than in 2021.

LESSONS LEARNED

"The drought standpoint won't ever go away. There will always be dry conditions somewhere, but when it's widespread in cow country, that's when we see an impact," explains Oklahoma State University (OSU) agricultural economist Derrell Peel. "Producers are being very cautious with these record-high prices after going through 2014 and 2015."

Peel refers to the decline in 2014 cattle inventory numbers that led to higher prices. However, that price hike started to turn around in 2015, and by 2016, prices were considerably lower. The weekly weighted average steer price per cwt in 2013 was $125.87. In 2014 and 2015, it had increased to $154.26 and $147.92, respectively. But, by 2016, the price had declined to $120.77 per cwt.

"Most all of us remember 2014 and 2015, when we were doing well and then prices fell more than expected," Perrier points out. "It really makes us be cautious now."

Since then, cattle producers like Perrier and Iowa cattleman Dan Hanrahan have taken steps to manage risk to protect their calf prices. One tool they use is Livestock Risk Protection, a federal livestock insurance product similar to federal crop insurance. It has been available since 2001 to insure producers against market prices falling below a predetermined price. OSU's Peel recommends it for any producer selling cattle.

For Hanrahan, 2025 will be the first time he has used the plan. "I think during these high prices, all cattle producers are looking at ways to get the most out of their calves. We've seen plenty of times when we have sold calves considerably lower. We want to be able to cash in on this while it's here," he says. Hanrahan is still gathering information before determining what level of coverage to use for his calves this fall.

STRONG PRICES HAVE STAYING POWER

Peel doesn't expect these record cattle prices to be gone in the next couple of years and contends they could last longer depending on when producers start to keep heifers and build numbers back up. "As long as the demand hangs in there, we will have good prices, because the supply is keeping us in that space," he explains. Consumer demand for beef has continued to drive producers to be more stringent on the cattle they keep versus what is sold to take advantage of the income.

"We have to look at the pipeline, too," he continues. "Even if producers would start keeping heifers back, it would take two years before they are producing calves. If those heifers don't calve until 2027, the beef supply doesn't change until 2028 at the earliest."

Peel points out in years of lower prices, some producers may give open heifers another chance to breed. But, when they are worth more, they get sent to the feedlot. Heifers that are implanted and sent straight to the feedlot won't come back to the herd for impulse breeding to be made into replacements. They are already being sent on to the beef market.

Instead of keeping heifers for replacements, Hanrahan sold more of them out of his 2024 calves than he normally would to help pay for the farm's operating costs. This is common among cattlemen when prices are high. Peel recommends producers take advantage of financial recovery and pay off what debt they can while they have the extra revenue. In turn, that makes it easier to look long term to retaining heifers.

Most cows are held to higher expectations when cull prices are inflated. After calves are weaned in the fall, if a cow is older and not keeping up with her younger counterparts, or if she comes back open or has physical problems with soundness, producers are more likely to send her to town.

When selecting bulls and heifers Perrier, says he tries to be equally hard on quality from year to year, but some years they are more stringent. "If they aren't good enough to be seedstock during a good market year, then they may not work when the market is poor either," he says. Besides their registered herd, they also have a commercial Angus cow herd. Regardless of which herd his family is managing, they want to have practical, profitable cattle and not follow trends.

Perrier's ranch dates to 1867. The cow herd has remained because they strive to produce cattle that excel in reproductive efficiency, performance and end product merit. For Hanrahan, most of his cows are not registered, but he selects them the same as he does his registered herd. He also sells a small number of registered Angus bulls to other breeders in the area.

Perrier's bull market is larger with the bulk of his bulls sold at an annual fall auction. Private treaty bulls are priced and sold in the spring. "We price bulls based on what four to five feeder cattle are worth. That's higher now than it has been in the past," he says. Their bull customers are more likely to sell calves earlier to take advantage of higher prices. Seedstock producer Perrier will generally wait longer. "I'm less aggressive in selling cattle early because I don't have added incentive to do so," he says. "I can take the time to determine what needs to be a replacement in our cow herd or a bull for our sale."

A LOOK TO THE FUTURE

OSU's Peel says while strong prices will likely continue into the next few years, so many factors affect today's market that didn't register even a couple years ago. "We don't know many details on how trade could be affected by tariffs yet. We continually import and export beef, and the net impact may not be affected at all," he explains. "The threat of recession has gone up, and that could affect demand and, therefore, affect beef prices, too. Markets don't like uncertainty."

Hanrahan and Perrier both have been involved with industry organizations through the years, which has strengthened their knowledge of how beef is marketed beyond the feedlot. As chairman of the Iowa Beef Industry Council, Hanrahan says he saw the importance of how Beef Checkoff Program dollars have worked to increase beef demand and increase profitable returns to producers. "Through the activities funded by the Checkoff, our producers have seen a steady increase in the value of a fed steer," he explains. "The U.S. has a product that is accepted by the consumer both domestically and internationally. We know the quality of beef we raise and have pride in raising this product for consumers."

As of late, supply has had a hard time keeping up with demand, leading to higher market prices. To help meet the growing demand, Hanrahan would like to grow his cow numbers but knows the challenges that come along with expansion. "I'd like to grow my herd, but I have to be able to make the most of the land I have available here since I'm in such close proximity to Des Moines," he points out. "It's important to look at all practices and how they can help us grow while staying sustainable. I am looking at how cover crops or a secondary crop can extend my grazing period, which might allow me to add more cows since there isn't a lot of land available right here."

Perrier has tried to take advantage of expanding his Kansas ranch when the opportunity presents itself by adding both acres and cows. This is especially important if any of his five children -- ranging in age from 6 to 21 -- would like to return to the operation. "After graduating from college, I didn't come back to the ranch right away. My family went through the farm crisis, and I looked at other opportunities but eventually saw a time to return," he explains. During the past 20 years since, he and his father, Tom, have worked to build up the organic matter in the soil and continually improve the land, making it sustainable for future generations.

Perrier's children are the sixth generation on the ranch, and he says of the prior five generations, one child returned to continue ranching. "Hope (6) is at the age she wants to be a paleontologist right now, but the rest of them have all indicated some level of interest of returning to the ranch," he says. "That is both exciting, but it's also fairly scary to me. There have never been multiple siblings return to our ranch, but we're trying to make sure we can figure it out if they're interested."

The additional profits currently seen in the cattle sector certainly make the thought of expansion a possibility. Peel does expect prices to stay on pace this year and says there is a chance of even stronger prices, even though records have already been hit. "It really comes down to how do we do this if drought isn't a factor and heifers are kept for replacements that would normally show up in feedlot inventories? This would cause a tighter beef supply and push prices even higher," he concludes.

GUARDED OPTIMISM ACROSS CATTLE COUNTRY

Historically, cattle producers are not used to prosperity and experiencing long-term prices at an all-time high. As a result, many today have guarded optimism about just how high prices will go. At Dunlap Livestock Auction, in Dunlap, Iowa, where cattlemen get true price discovery, prices continue to climb, owner Jon Schaben explains.

Schaben has been in the auction business his entire 60 years. He grew up in the barn his parents once owned and now owns it with his brothers. Additionally, he is now an owner in the West Point Livestock Auction, in West Point, Nebraska.

UNPRECEDENTED TIMES

Schaben's involvement in more than 250 auctions each year leads to interaction with over 100 people at each sale. This, along with an additional 35 phone calls with cattle producers each day and several farm and ranch visits annually, means Schaben is closely connected to the beef industry. "These producers don't know how to act when the prices get this high. History tells us markets will go up and down, but we certainly haven't ever seen them continue at a level like this," he says.

Through the years, Schaben has watched producers make changes to the genetics in their herds to raise more high-quality beef, and he is glad to see they now are being rewarded for their hard work. However, he is concerned the price of beef in the grocery store could get some consumer pushback. "I don't think $4.50 per pound is too high for hamburger, but at some point, the consumer may think it is," he continues. "During COVID, our industry was seeing deflationary prices, and we didn't worry about prices then; so we shouldn't have to worry about if prices are inflationary now."

Schaben explains the supply and demand model shows prices could still go higher, and continual acceptance at the consumer level will be needed to support higher prices. "We may have changed the landscape enough in the beef industry that we won't see cycles in the market anymore," he adds. "The size of the cow herd is not increasing, so we are driven even more by demand."

The COVID pandemic, he speculates, may have been when this break in the cattle cycle began. "It was such a wild card," Schaben says. "People sold heifers then to pay off debt. We were backlogged in the processing sector, and it really caused problems all the way back to the cow/calf producer."

DEMAND OUTSTRIPS SUPPLY

Strong demand for feeder steer and heifers continues to be seen in both of his barns. Schaben says a lot of good replacement quality heifers have been sent to the feedyard and are not making their way back to the cow herds.

And, now, high prices continue to affect cow numbers, with the cull-cow market staying steady, making the inventory pot even smaller. Producers sold cows that needed to be culled last year. Market bull prices got to the point where a lot of bulls were bringing more in the cull market than when the producer purchased them as a herd bull. Schaben is uncertain when or if the cow herd will see a rebuild or will continue to be at the lowest levels seen in more than 60 years.

The feeder cattle market is proportional to the fed cattle market, Schaben explains. Demand keeps prices high on the feeders and breaks even at a good level for fed cattle. For now, the uncertainty in how high the prices will go continues, but he remains optimistic for producers. "Our product is in a good position right now at the consumer level. If we can find the needed labor to keep the product in front of consumers and get enough younger producers to raise the cattle, then we could be sitting well in the cattle industry for some time to come," he says.

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-- Jennifer Carrico can be reached at jennifer.carrico@dtn.com

-- Follow Jennifer on social platform X @JennCattleGal

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