Picture a rancher staring at drought-baked pastures, watching cattle prices soar to unprecedented heights while wrestling with impossible choices. This isn’t prosperity despite the record prices. It’s survival amid a perfect storm of challenges that’s reshaping America’s beef industry in ways we’ve never seen before. The story unfolding across cattle country reveals a paradox that defies simple economics, where historically high beef prices mask an industry in crisis.
Record Cattle Herd Contraction Reaches Historic Lows
The U.S. cattle herd has shrunk to approximately 94.2 million head as of July 2024, marking the lowest inventory since 1951. This represents a staggering decline from almost 95 million cattle just four years ago. The all-time peak in the U.S. herd came in 1975, when it reached 132 million head.
This dramatic contraction isn’t happening by accident. Farmers have been driven to sell off cattle because of severe drought conditions and the rising cost of supplies needed to support their herds. The national beef herd hit a 73-year low in January 2024 at 28.2 million head, though beef herd numbers have increased slightly to 28.7 million head according to the July cattle inventory report.
Drought Devastation Forces Painful Herd Liquidation
An estimated 30% of the U.S. remains in drought conditions, with less grasslands as a result of less water equaling smaller herds. According to the U.S. Department of Agriculture, 60% of the nation’s cattle are affected by drought, forcing cattle to travel miles and miles each day in 100-degree weather to reach adequate forage.
The human cost behind these statistics tells a more heartbreaking story. When ponds and springs dried up, some ranchers hauled water by the truckload just to keep animals alive a few more weeks, while others paid record prices to bring in hay from hundreds or thousands of miles away, often spending more on freight than on the feed itself. Selling off breeding cattle wasn’t just an economic decision, it was an emotional one, representing years or even generations of herd development lost in a single season, as drought forced families to part with genetics they had spent decades refining.
Skyrocketing Feed Costs Squeeze Profit Margins
Hay prices shot up by about 45% in 2022, and with feed costs consuming the value of livestock, ranchers sold off their herds or stepped up the slaughter of their cows and heifers. Feed represents a big input cost that eats into the margin of ranchers, making it a critical factor in their decision-making.
This forced many ranchers to sell off a part of their herds, which led to fewer calves, and in turn, there were fewer cattle going into feedlots, where profit margins are thin because of high feed costs. The ripple effects continue to challenge the entire supply chain, as ranchers struggle to balance input costs with market realities.
The New World Screwworm Threat Closes Mexican Border
The New World screwworm is a parasitic fly that lays eggs in the open wounds of warm-blooded animals, with larvae that hatch from the eggs and burrow into tissue of animals to feed on them. This parasite was successfully eradicated from the United States in 1966 and from Mexico in 1991, but some cattle in Mexico have been found infected with the parasite and all Mexican beef imports have been shuttered.
Mexico’s National Service of Agro-Alimentary Health, Safety, and Quality confirmed on October 6 another case of the flesh-eating screwworm parasite in Nuevo Leon, marking the country’s second confirmed case in approximately two weeks. The U.S. Department of Agriculture has closed the border to Mexico for imports of live cattle, bison, and horses on and off since 2024 due to the spread of the New World screwworm.
Meatpacker Consolidation Creates Market Control Issues
Four giant firms – Tyson Foods, JBS USA, Cargill, and National Beef – dominate roughly 81-85 percent of the U.S. fed-cattle market, giving them near-total control over cattle prices and the national beef supply chain, allowing them to dictate both ranch-gate bids and supermarket markups. In February 2022, JBS USA agreed to pay $52.5 million to settle a class-action antitrust suit alleging that it, along with Tyson, Cargill, and National Beef, colluded to suppress ranch-gate bids and inflate downstream margins.
This dynamic has led to an environment where beef prices are both too high for consumers and too low for ranchers – and the meatpackers are the reason for both. USDA data show that the gap between what ranchers are paid for cattle and what consumers pay for beef has widened sharply in recent years, as the U.S. herd has fallen to 86.7 million head while packers depress bid prices by leveraging low-cost beef from Mexico, Brazil, Canada, and other countries.
Paradoxical Packer Losses Despite High Beef Prices
Packer margins have declined 120% from already negative margins in 2024 and are estimated to be down 269% from 2023. Packer margins slipped into the red in September 2024, and through the week ending Oct. 4, 2025, packer margins were a negative $126.50 per head, up slightly from a year earlier at a negative $125.65 per head.
With fewer market-ready cattle available, plant utilization rates have dipped and some facilities are scaling back operations, including reduced shifts and shortened workweeks, with packing plants operating at 77% capacity for the week of Oct. 4, down from 85% a year ago. This creates an unusual situation where processors are struggling financially even as retail beef prices hit record levels.
Record Cattle Prices Benefit Producers Finally
Through 2024, prices climbed to new record levels and continued rising into 2025, reaching the highest nominal levels ever recorded. Cow-calf producer margins in 2025 are estimated to be up 122.3% from 2024 and 180.67% from 2023, reaching approximately $900 per head. Feedlot margins are also projected to surge – up 351% from 2024 – to about $514.33 per head.
In recent years, the cattle industry has been one of the few sectors in agriculture operating in the black, though record input and supply costs mean cattle farmers and ranchers are walking a thin line between making and losing money, and after years of drought and liquidation, many simply don’t have the volume of animals needed to generate dependable income.
Consumer Beef Demand Remains Surprisingly Strong
Since the 2020 pandemic, Americans have developed a preference for beef over other meats, such as pork or poultry, and even though the average consumer eats about twice as much chicken by volume, beef remains the top choice when quality and taste are prioritized. U.S. beef demand has remained strong even as beef prices hit record highs, with USDA’s September WASDE report projecting U.S. beef consumption at 28.6 billion pounds in 2025 but expected to fall about 2% to 28 billion pounds in 2026.
Consumers in the United States are willing to pay around $9/lb for steak, which is within current pricing, however, prices are expected to reach record highs in the upcoming months, approaching nearly $10/lb. Beef prices have increased over 50% since 2020, causing restaurants and stores to raise their prices.
