A little-noticed USDA report last month revealed a stunning shift in farm economics: For the first time on record, livestock producers spent more buying animals than feeding them in 2025.
Each year the USDA publishes the Farm Production Expenditures report, compiling information obtained from farmers on the cost of raising their crops and livestock for the calendar year. The agency releases nearly 400 statistical reports each year, and due to the limited impact on day-to-day markets, this is one that is typically lost in the shuffle.
Protein demand drives shift
Livestock operations saw expenditures on animal purchases exceed spending on feed for the first time in the survey’s 41-year history. Animal purchases are defined as any expense by farmers on breeding and market livestock. The predominant example in the cattle industry would be replacement heifers and bulls for breeding stock, and feeder steers for market animals.
Livestock expenditures increased $20.9 billion to $74.4 billion, surpassing feed at $71 billion. The reversal highlights the impact that the rise in consumer demand for proteins has had on cattle values, and to an extent hogs and poultry. The Farmer Prices Paid Index shows increases in cattle classes were much sharper than those in both hogs and poultry through 2025, and combined with total U.S animal inventories remaining mostly flat, we can intuit a significant amount of the historic increase came from spending on cattle. The explosion in protein demand has been accompanied by multiple years of relatively plentiful and cheap grains that have helped ranchers feed animals to higher-than-ever weights while mostly keeping net spending on feed static in recent years.
The changing dynamic highlights that even within the cattle industry’s bull run in recent years, disparity in profitability along the cattle supply chain exist. Ranchers that are in the cow-calf sector have profited the most from the change. Compared to backgrounders and feedlot owners that must purchase cattle on a regular basis, they are insulated from the sharp rise in livestock values. Cow-calf operations can still feel the squeeze when confronted with the need to purchase breeding stock, but those instances are infrequent compared to the more regularly occurring purchases of animals intended for slaughter.
A brake on herd building
The rise in livestock values also points out a potential wrinkle with rebuilding the cattle herd. The U.S. herd shrinking to a 75-year low last year was driven by multiple factors, though one key driver was aging farmers either retiring or scaling back livestock operations in favor of less labor intensive row cropping.
Historically, beginning farmers have flocked to beef cattle and livestock in general as their commodity of choice due to the low capital barriers relative to crops. Higher costs for acquiring cattle, as well as high interest rates, make the entrance for new ranchers who may have limited equity difficult at this time.
With cash prices rebounding this week after July’s sell-off in both cash and futures markets, a near-term bottom looks to be carved. However, stubborn calf prices, while good for established producers, is likely to continue to draw out the herd rebuilding cycle compared to previous decades as financial conditions make it difficult for new and beginning producers to enter the market.