Driven by record-high beef and cattle prices, the cattle industry has become a major focus of discussion, not only in mainstream livestock news and information sources, but others as well. The Feb. 16 issue of Barron’s, a leading purveyor of financial news, is one recent example.
In addition, the major television news networks for the past 12 months have carried stories on beef prices and how they have stretched the consumer food dollar.
While the cattle cycle has always been a focus for cattle industry analysts who predict markets, one does not generally expect to see articles like the one in Barron’s that discuss the factors and challenges faced by ranchers that impact their decisions in managing their ranches and cattle, including the size of the herd — reducing the size of the herd or building the herd. Decisions on the ranch are often unique to every ranch or rancher’s circumstances.
I often comment that an average ranch does not exist They each have their own set of circumstances regarding grazing, cattle, financial resources, marketing objectives, and perhaps, most important, family situation, which in many cases has become the key factor regarding the direction of the ranch going forward.
Throughout the 1990s until 2000, the beef and pork industries expanded production, both in the U.S. and globally. As red meat processing capacity grew, the economic incentive for herd building — both cattle and hogs also grew. This all changed as the U.S. was hit with COVID, drought and high grain prices during the short four years from 2020 to 2024.
The economics that had defined both the cattle and hog industries changed significantly. Both industries transitioned from optimistic herd building to the challenge of low prices, increased costs of production and drought. Perhaps more importantly, the structure of the cattle industry began the process of change. And more recently, packers are consolidating production capacity and the process only in the beginning stage.
Many plants are outdated to accommodate the economic opportunities presented by technology. It is a business decision that will transform industry economics and subsequently, the incentive to build cattle numbers.
The beef industry has evolved and consequently, so are the drivers to the industry’s economics. While a shift in demand (consumer tastes and preferences) is likely one key factor impacting industry economics, others including changing the global economics of trade, production practices, and U.S. and global production capacity are having a significant impact on beef industry and the cattle inventory going forward.
I look back over the 40-plus years that I have analyzed beef industry economics and recognize that it is becoming increasingly apparent that the economics driving the industry today are not the same as those of 50 years ago or even 10 years ago.
