USDA released a barrage of reports impacting the cattle markets in January. The agency released its bi-annual Cattle Inventory Report In addition to the typical monthly Cattle on Feed report and Livestock Slaughter. Datapoints from these reports show us how the supply of cattle is changing over time and also provide some clues to how inventory may move in the near future.
The Cattle Inventory report showed beef cows as of January 1st declined for the ninth consecutive year to 27.607 million, but beef heifers retained knocked its trend of eight consecutive declines with an increase of 42,000 head to 4.714 million. This indicates that rebuilding is limited at this time, and likely in the earliest stages if it is truly beginning.
Placements in feedlots can be used as another measure of heifer retention since it shows the flow of cattle from ranchers to feedlots, and the percentage of those cattle that are steers or heifers.The most recent report from USDA shows heifers on feed at 4.435 million head, or 38.7% of the total cattle on feed. This is down slightly from the 4.575 million in January 2025, but nearly unchanged as a percentage of the total herd indicating retention has not been increasing in large numbers so far. Slaughter reports showed that in 2025 the number of heifers slaughtered declined 7% compared to the 4% decline in steers slaughtered, which is also a potential signal of early rebuilding.
It should also be noted that the physical capacity for expansion does exist as the extended drought that led to liquidation of the U.S. cattle herd has eased somewhat, expanding grazing opportunities. According to the National Drought Mitigation Center, drought impacting the cattle herd peaked in their November 8, 2022 report showing 28% of the herd in the most intense drought conditions, and 89% of the herd experiencing any level of abnormal dryness or drought. The most recent data shows only 2% in the most extreme drought categories and 69% in any level of drought.
Limitations to Expansion
Despite some data from USDA indicating early expansion may be occurring, barriers still exist for ranchers to grow the herd in a meaningful way. Multiple factors play a role in the decision to retain or sell a heifer, one of the most important being the expectation of future profits compared to the present. If a rancher expects to sell a heifer today and net a higher profit than if they had held the cow for breeding, little incentive exists to retain heifers. Cattle futures and cash values have continued their uptrend that has mostly been in place since 2022, although concerns remain over whether the bull market will persist long enough to generate similar returns in to the future. Potentially softening consumer demand for beef is one of those possible pitfalls. Research from the National Cattlemen’s Beef Association indicated consumer demand for beef remains strong, but shifted towards more value oriented purchases of ground beef in the last quarter of 2025 as opposed to pricier steaks. Part of this shift can be attributed to seasonal changes as we moved away from grilling season, although it may also be interpreted as a sign of continued stress on household food budgets. Consumer desires will continue to be tested as the price between beef and other popular proteins continues to widen.
Another item of concern is the potential for a re-opening of the U.S. to imports of cattle from Mexico. New World Screwworm continues to inch closer to the U.S., and pressure to keep the border closed may falter if the parasite establishes a presence on both sides. This would resume a steady source of supply for feedlots that has faced restrictions for over a year now. According to data from the USDA-ERS, 1.25 million cattle were imported from Mexico in 2024. Rebuilding is likely to be a prolonged, slow trend compared to cattle inventory cycles in the past.