Beef attracts too many consumers

Brian Earnest CoBank

Record beef prices are receiving a lot of attention, and the argument can be made that extraordinary demand is the key driver. The COVID-19 pandemic helped lead us to a place where “leveling up” through access to luxury goods is prioritized instead of luxury services. And beef, specifically excellent-quality beef, is a luxury good that can be accessed for at-home consumption – at a fraction of the cost of fine dining establishments, with a potentially better eating experience.

The American consumer’s access to affordable excellent-quality beef rivals that of any other nation. Retail per capita beef consumption is headed for 60 pounds that year, and 87 percent of production is Choice grade or better. But that’s not always been the case. For the first time since 1988, the volume of U.S. Prime-graded beef produced in March through May exceeded the volume of Select-graded.

The U.S. beef industry is currently producing a much-different and better-quality product than 30 years ago. That’s largely due to cattle producers in the 1980s through the 1990s recognizing quality issues in the genetic makeup of the herd. Since then the industry has been selectively making improvements to produce carcasses with greater fat marbling for exceptional palatability. For example, programs like Certified Angus that reward quality have boosted overall meat performance.

At the same time, a combination of weak forage conditions after several years of successive drought has yielded extremely difficult conditions for the nation’s cattle ranchers. It’s worth mentioning that the average age of a cattle rancher is 58 years old. We’re not making enough new ranchers, nor do current ranchers have adequate access to well-conditioned pastureland to raise more cattle.

Another challenge in herd building is the price of day-old calves, which set a new record at more than $400 per hundredweight in the summer. With calves so expensive, heifer retention for breeding purposes has suffered and fewer beef cows have been culled. In addition, the discovery of New World Screwworm in cattle in Mexico further exacerbated tight feeder-cattle supplies because half of all imported U.S. cattle come across the southern border. Imported cattle account for about 3 percent of U.S. supply.

Beef demand remains exceptional

The consumer perception of the health benefits of eating beef has in recent times improved as well. Where red meat was once demonized as an artery clogger, beef is now on a pedestal for fitness-conscious consumers who laud protein content for muscle production. It seems the U.S. consumer cannot get enough animal protein those days, and beef remains king.

According to the most recent inflation data released by the U.S. Bureau of Labor Statistics, in July core inflation increased 0.2 percent month-over-month but increased 2.9 percent year-over-year. The all-fresh retail beef prices surged by 9 percent year over year, hitting an astonishing $8.90 per pound. Even at those levels, prices have been unable to tame unyielding consumer interest in beef.

Demand remains strong but increasing prices for beef cuts and steak-type items are pushing beef-loyal consumers to buy lesser-tier beef items like a chuck roast or grinds instead of a ribeye, filet or other pricier steak items. Consumer pressure on the ground-beef supply has contributed to tighter availability and interest from other producing nations.

U.S. grain-fed beef has much less lean content than grass-fed. As a result, U.S. beef production tends to have more greater-fat-content trim available for grinding. Beef- and dairy-cow harvest availability has been under pressure that year, boosting reliance on beef imports for lean content. U.S. net beef imports totaled more than 2.4 billion pounds through the 12 months ended in May, and Brazil has made major contributions.

Beef demand globally strong

As U.S.-consumer beef demand has outstripped supply, those systems are more-heavily reliant on global beef and cattle supplies. Prices in the global marketplace have adjusted accordingly and continue increasing in tandem. The Food and Agriculture Organization bovine meat index reached an all-time record of 141.2 during August, a 2.5 percent increase month-over-month and a 12.5 percent increase year over year.

The Tariff Rate Quota for “other nations” opens on the first of every year, In 2025 the “other nation” quota was filled in just 17 days, with Brazil providing the bulk of shipments. Following the fulfillment of the Tariff Rate Quota, a 26.4 percent tariff is levied on U.S. beef imports from Brazil. Even with that tariff added, Brazil beef remained competitive in the United States due to exceptional demand. But as global markets adjusted, imports were on the decline. And the new 50 percent tariff will further soften Brazilian beef’s competitive advantage in U.S. markets.

Tight cattle supplies boosting values

Cattle prices were at historic numbers to start 2025 and have only continued to be more through mid-year. Pasture conditions have seen some improvement throughout the bulk of the heavy cattle-producing U.S. regions, but economics still favor further contraction of the nation’s cattle supply.

So it was no surprise that the U.S. Department of Agriculture’s mid-year cattle-inventory report released July 25 revealed that the U.S. total cattle inventory, beef-cow inventory and calf-crop inventories had all decreased 1 percent from 2023 – the most recent mid-year report. At 94.2 million head, the biannual cattle inventory was the smallest mid-year count on record through the past 75 years.

For now the herd appears to be stable, pulling back on the pace of liquidation but not yet rebuilding. Most observers suggest that the nation’s cattle supply will remain strained through at least 2026 and likely through 2027.

The percentage of heifers on feed can be used as an indication of retention. Most analysts point to a long-term average of about 37 percent as a baseline indicator. But an increasing number of beef-crossed dairy animals entering feedlots may provide as much as a 2 percent to 3 percent variance. The latest U.S. Cattle on Feed report showed 38.1 percent of feedlot inventories were heifers, an increase from April’s 37.6 percent but a decrease from 39.4 percent a year ago.

In addition to dampened availability of cattle from traditional beef production, cumulative 2025 cow slaughter decreased about 12 percent year over year and is 24 percent less than the five-year average. After running at well more than the historical average for several years, capacity utilization has declined significantly during the past 18 months. It decreased to just 77 percent in the last week of July – at 60 percent for cow plants. Saturday kills have been almost non-existent.

Bottom line, the fundamentals have firmly driven the market to the point where it is currently. Twelve months ago there was a question whether beef demand would remain at increased prices, but now most analysts are fairly certain that beef-value risk is to the upside.