CattleFax is forecasting continued decline in cow slaughter this year and next, with a bit of a decline on the dairy side.

Looking at cow slaughter alone, the fourth-quarter culling rate was low enough to indicate the cycle had turned the corner, moving from liquidation to expansion. Heifer numbers, however, indicated stabilization, Good said, predicting the start of 2025 to be the cycle low at a cow herd inventory of 28 million head. 

While record-high calf prices are providing incentive to expand, multiple headwinds — weather conditions, age of producers, labor cost and availability, capital cost and availability, urban sprawl, and alternative land uses — continue to slow the rebuild process, he said. 

Supplies will continue to tighten going forward, Good predicted. Beef from dairy, drought forcing cattle to town and prices encouraging marketing of heifers have kept on-feed numbers elevated. 

However, Good said, “At some point you start to keep heifers back, and as that occurs, you’ll have a bigger year-over-year decline than we’re expecting this year.”

On-feed numbers Jan. 1 started the year “just a skosh” below a year ago, Good observed. On-feed numbers will be constrained by tighter feeder-cattle supply and placements in 2025.

“With fed-cattle harvest down 700,000 head and cow and bull slaughter down 350,000 head, the industry saw a total decline of a million head this year,” he said. 

He predicted another 1½-million-drop within the next three years. 

“The big drop will occur when heifers start to be held in earnest,” Good said. “It could be this year, could be next year.”

Even with the drop in the number of cattle harvested, supplies were not different in 2024 than in 2023 as decreases in headcount were offset by heavier cattle. Weights last year increased by 26 pounds (lb.) per carcass — equivalent to a million head.

Fewer cattle coming to market than shackle space at the processor, along with increasing demand, meant feeders gained leverage and were able to capture more of the dollars put into the system upstream at wholesale and retail.

Available supplies will get tighter, and we’re adding capacity, Good said. 

“That bodes well for the cattle producer as far as leverage. We will continue to get a higher and higher percentage of the available dollars that are above us.”

Moving forward, Good predicted, cattlemen will continue to do more with less.

“We’re paid on pounds,” he reasoned. “The market’s demanding tonnage because of record-high beef demand. We’ll continue to produce more tonnage with less as we go forward.”

On the trade front, imports were record-high, driven by 90% trim values, Good reported. Despite sharply higher prices, export tonnage was down only 1%, while export values were record-high. Tariffs are the wild card.

“Supply was as big as we’ve seen in 15 years, and yet we had record-high beef values in all classes of live cattle. That bodes extremely well for the demand equation.”

The demand side

Beef demand is as good as it’s been in 40 years — from an academic standpoint and a price standpoint, Good shared. Pre-COVID, demand was increasing at 4.5% per year. 

That percentage has escalated since COVID. Pork and poultry, on the other hand, went up with COVID, but they flatlined or came down after. 

With predictions of supply down about 1.5% and inflation up 2.5%, the math would put demand up 4%. CattleFax is predicting 3% — still very strong from a historical perspective, but cautious due to the headwinds. It is a turbulent time, Good noted, with questions surrounding inflation, interest rates, the GDP, unemployment, tariffs, the budget deficit, government spending and DOGE (the Department of Government Efficiency).

“We have gained market share. Demand is stout,” Good said. “We continue to expect that to be the case, but we still have to have a little bit of caution. Price spreads are wide. We have to recognize that our consumer today is fully employed, or close to it. Are there some changes taking place that will affect the economy that makes us just a little less optimistic going forward? Today we say no. Today we say we like where we’re at from a demand standpoint.”

Good noted much of the increase in demand for beef this past year has come from increasing value in the end meats — the chuck and the round — while demand for middle meats has leveled, indicating the consumer may be starting to trade down.

“Now, as we talk about the spreads,” he concluded, “we still see tremendous demand for upper two-thirds Choice and Prime.”