Every cattle cycle looks a little bit different, but they all have peaks and troughs related to inventories and prices — and all the volatility that goes along with it, according to Lee Schulz, ag economist with Ever.Ag.
Schulz recently joined “AgriTalk” to discuss current trends in the cattle and hog markets with host Chip Flory. He says the supply side of the cattle equation is essentially unchanged.
“We’ve continued to put off expansion and to really continue to contract,” says Schulz, who thinks some supply reductions have been mitigated by higher carcass weights.
He also argues profitability drives, and the level of risk producers have faced over the last several years has pushed off that expansion.
“We’ve needed higher profitability levels to incentivize that expansion,” Schulz explains. “That is on the short-term horizon here. But if you would have asked me a couple of years ago what this expansion cycle would have looked like, I would have said it would have been a little bit smoother.”
One factor contributing to contraction in the market is that heifers are still worth more in the feedlot than on pasture. Record wholesale cattle values continue to incentivize the industry to market more beef.
“It’s really the short-term versus the long-term play here,” says Schulz, who is starting to see a transition.
Analyzing USDA’s long-term forecast from October 2024, Schulz notes the prediction for an increase in the beef cow herd Jan. 1, 2027.
“That would give us our highs in prices in 2026 with beef production finally increasing in 2028,” he says. “So far, that’s how it’s playing out. As we look at some of the fundamentals, obviously things could change. But that gives you a bit of a timeline for where things are at.”
With previous forecasts, there was the expectation to start expansion in 2024. The industry has continued to push that off.
“With cattle, you have the biologics of the industry,” Schulz says. “It takes a very long time to turn this ship. I think we can make some adjustments, but ultimately, once that expansion is dictated, it’s going to take a while.”
Demand has remained high in 2025 as consumers continue to eat more beef at higher prices. But is there a limit?
“As supplies are going to tighten, we’re going to eat less beef — but it’s at what price that beef is going to be at,” Schulz says. “Will you continue to see higher prices offset some of that reduction in quantity? So far, consumers have been willing and able to pay those higher prices. But that’s why we monitor things like consumer income and consumer sentiment. That’s going to drive beef demand here going forward.”
When it comes to the futures market and feeder cattle, Schulz thinks tight supplies are still in front of us and demand has to hold — so we may not have seen the highs yet. While he’s confident we’re not going at an increasing rate, he thinks the markets will plateau.
“As we get into summer and fall, that’s really going to dictate if have we put in the highs,” he says.
With cattle prices where they are, every animal in a feedlot, in transit or on pasture is at risk. Schulz recommends cattle producers go on the offense and look at ways to manage risk.
“You have to look at how do we manage the downside to this market potentially just due to the sheer cost of those placements,” he says. “Interest costs are three times as high as they used to be if you look back at the last decade. It’s not just feed costs either. It’s a lot of those costs we need to look at how to manage.”
Pork Markets Remain Steady
When it comes to the pork industry, Schulz sees the hog market dialed in. Supplies are similar to a year ago.
“When you look at it from a production standpoint, yes, slaughter’s down a little bit. But as we adjust for weights, we’re seeing a bit higher production,” Schulz explains. “Historically, we’re still pretty strong for demand, but I think we need to see further strength in demand if we continue to push these higher prices. The export situation remains critical for the hog market as we think about the ability to send our products to the highest valued market — and that continues to be a real crux for this industry.”
Listen to the entire conversation:
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