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Cow-calf producers navigate record margins in a volatile market.
Producers, feedlots and packers are navigating a complex environment marked by competition for shrinking cattle supplies and limited capacity to increase cattle herds.
Low cattle inventories continue to sustain strong margins for most cow-calf producers. Improved moisture in the Pacific Northwest and Montana has eased the need for herd reductions, while drought in the Southwest and Midwest has sharply cut cattle numbers. On California's central coast, concerns persist over insufficient rainfall and poor pasture conditions, leading some producers to consider relocating cattle. Sustained dry conditions in most major cattle producing areas are expected to constrain herd rebuilding which will support cattle prices through 2025.
Feedlots remain profitable despite high feeder cattle costs. Historically strong margins are supported by feed costs which are at their lowest since 2021. January's national average feed cost is $25 per cwt lower than the previous year, driven by lower corn and hay prices. (Hay prices, however, are beginning to rise.) Low feed costs have encouraged feedlots to extend feeding periods to increase the weight of cattle sent to packers. Higher weights have helped to offset some of the impacts from a smaller feed cattle supply. Meanwhile, the resumption of livestock imports from Mexico is helping to boost feeder cattle supplies. (In November, New World Screwworm was detected in Chiapas, Mexico and cattle imports were suspended.)
Packers are facing their narrowest margins since 2012 due to high cattle costs. Given these tight margins and a lack of competition, packers are hesitant to ramp up slaughter rates in the near term. Growth in direct-to-consumer sales has prompted some producers to move away from packers, opting instead for mobile butcher trailers or investing in local butcher facilities.
Despite the expectation of high cattle prices and cow-calf producer profitability in 2025, the pressures squeezing meatpacker profitability could eventually ripple back to producers.
Profitability
March 12, 2025
Cattle feeders: Profitable - Bearish 12-month outlook
Cow-calf producers: Profitable - Neutral 12-month outlook
As feedlots grapple with tightening cattle supplies, competition may continue to ratchet the cost of feeder cattle higher. This could offset the financial benefit of lower feed costs.
Low national cattle inventories continue to bolster cow-calf profitability. However, already tight packer margins could weigh on cattle prices if rising beef prices outpace consumer demand.
