U.S. cattle producers have enjoyed several profitable years in large part due to declining cattle numbers and strong beef demand. These two factors will likely determine whether producers will have an even better year in 2025 than last year. But a big wild card will be whether President-elect Donald Trump goes ahead with his threat to impose 25% tariffs on all goods from Canada and Mexico, an additional 10% in tariffs on all Chinese imports and a 100% tariff on imports from the BRICS nations. Fed beef processors meanwhile are likely to lose money again this year.
This past year saw record prices for all classes of beef cattle. Live cattle prices, basis a 5-area steer, averaged $186.68 per cwt live, up 6.3% from 2023’s $175.54 per cwt live. Feeder steers (Medium Frame No 1, Oklahoma City) averaged $252.09 per cwt, up 15.3% from 2023’s $218.69 per cwt. Slaughter cows (live equivalent, cutter 90% lean) averaged $118.71 per cwt, up 25.3% from 2023’s $94.77 per cwt. USDA currently forecasts that live cattle prices this year will average $191 per cwt live, up 2.3% on last year. Feeder steer prices will average $272.50 per cwt, up 8.1% on last year and cow prices will average $127.75 per cwt, up 7.6% on last year.
Will Herd Expansion Begin?
In other words, producers will again enjoy higher prices, albeit with smaller increases than seen in 2024. The big question on the supply side will be whether higher prices will encourage cow-calf producers to retain more heifers than they did in 2024 and start expanding their herds in a meaningful way. Three potential negatives to this would be widespread drought, tariffs and a sudden decline in beef demand. Right now, beef production is forecast to decline 5% this year from last year. This might push retail beef prices high enough to force Americans to eat more pork and chicken.
The imposition of tariffs might upend the above price forecasts. If enacted even at smaller percentages, the tariffs could sharply increase costs for American businesses and consumers. They would make U.S. agricultural products, including meat, harder to market abroad, while simultaneously raising costs for farmers, food manufacturers and consumers, say agriculture industry groups. Should the three countries noted above impose retaliatory tariffs on U.S. meat and poultry exports, they could severely damage what is a vital global trade for the industry.
The economic impact of tariffs could be immense, given the highly connected nature of the three North American countries. In fiscal 2024, Mexico became the No. 1 destination for American agricultural exports for the first time ($30 billion). Canada was No. 2 ($29 billion) and China was No. 3 ($25.7 billion). The U.S. in 2023 imported nearly 17 million metric tons (mt) of agricultural goods from Mexico worth $45.5 billion, according to USDA data. Top categories included fresh fruits and vegetables (about two-thirds of all U.S. vegetable imports come from Mexico) sugar, dairy products and distilled spirits like tequila.
Meanwhile, Mexico last year imported 40.45 million mt of U.S. agricultural goods worth $28.6 billion. Mexico is the No. 1 importer of U.S. corn and corn sweeteners, leaving American corn farmers particularly exposed to retaliatory tariffs. U.S. agricultural imports from Canada in 2023 totaled 23.6 million mt worth $40.1 billion, with top commodities including beef, pork, dairy products, oats and rapeseed oil.
TYSON WILL RELY ON CHICKEN
TYSON Foods will rely on chicken profits this year to offset another big loss in its beef segment. Just two years ago, Tyson posted operating income for its beef segment of $2.502 billion and the year before a record operating profit of $3.240 billion. But the segment suffered an historic loss in fiscal 2024 and it faces a similar loss in 2025. As the largest processor of fed beef in the industry, its losses and those of other packers could have a bearing on live cattle prices this year.
Tyson Beef reported an operating loss of $381M for the year ended September 30, 2024. This went against a loss of $91M in 2023. This was despite the fact that sales of $20.479 billion were up 1.6% on 2023’s $19.325 billion and that its average selling prices was up 4.4%. Beef had an operating loss in the fourth quarter of $71M, versus a $323M loss in the fourth quarter of 2023, so at least Tyson saw a significant year-on-year improvement in the quarter. Operating margin for 2024 was a negative 1.9%, versus a negative 0.5% in 2023.
Annual operating income decreased, primarily reflecting compressed spreads as expected, Tyson CFO Curt Calloway told analysts last November. Uncertainties remain, including the timing and pacing of meaningful herd rebuild intentions, he said. These market dynamics were reflected in Tyson’s range of outcomes for operating income for fiscal 2025, where it expects a loss of $400M to $200M. This reflects a similar level of profitability year-over-year at the midpoint, said Calloway. The 2024 loss far exceeded Tyson Beef’s previous largest ever loss of $244M in fiscal 2006.
The reasons for Tyson’s negative outlook were clear. It cited USDA projections that domestic beef production will decrease 5% in 2025 versus 2024. USDA forecasts that production will be 25.665 billion lbs, versus an estimated 27.035 billion lbs in 2024. Total U.S. cattle slaughter in 2024 was an estimated 1.208M head lower than the 2023 total of 34.32M head. Analysts forecast that 2025 will see similar declines in total cattle slaughter, which will put even more pressure on beef processing margins.
Tyson Will Close Emporia Next Month
Tyson Foods has closed several poultry processing plants in recent years, and added a beef plant to its closure list last November. Tyson says it expects to lay off 809 employees at its facility in Emporia, Kan., which is a beef and pork non-harvest facility It announced in a letter to employees that it would cease all operations on February 14, 2025. Tyson officials reportedly told city officials that all Emporia operations would move to its Holcomb, Kan., beef facility. Tyson took over the operation of the plant in 2001 after buying Iowa Beef Packers (IBP). IBP had operated the plant as a cattle slaughter and processing facility for many years.
Analysts do not anticipate that any beef slaughter plants of any size will close in the coming year, although most if not all processors will lose money again this year. The reduced cattle numbers suggest that as brand-new plants start operations, they will struggle to buy cattle from established players. At least eight new plants are still in the works, with an avowed slaughter capacity of more than 9,000 head per day. Most analysts doubt that much of this proposed new capacity will come to fruition.
The outlook for the U.S. pork and poultry sectors this year is much brighter, especially for chicken. Tyson Foods in fiscal 2024 had an operating loss of $40M in its pork segment. But it says that USDA projects that domestic production will increase 2% this year versus last year. It anticipates adjusted pork operating income of $100M to $200M.
Chicken was the star performer for Tyson Foods and other poultry companies in 2024, and it will be more of the same this year. Tyson Foods’ chicken segment had operating income in 2024 of $988M, a dramatic turnaround from a $770M operating loss in fiscal 2023. It noted last November that USDA projects that chicken production will increase 3% in 2025, and Tyson says it anticipates adjusted operating income for chicken of $1.00 billion to $1.2 billion.
WEIGHTS SET NEW RECORDS
CARCASS weights set new records for heifers and overall carcasses in the latest reported week ended December 21. Heifer weights averaged 871 lbs, up 5 lbs from the week before and up 23 lbs from the same week last year. Steer weights averaged 953 lbs, up 3 lbs on the week before and up 11 lbs on the same week last year. Overall weights averaged 873 lbs, up 5 lbs and up 25 lbs, respectively. This was the equivalent of adding 18,150 cattle to the weekly harvest of 615,629 head, says HedgersEdge.com.
The carcass weights are far higher today than they were ten years ago. Steer weights did not surpass 900 lbs until the week ended October 25, 2014. They had risen to 950 lbs by the middle of last October. Heifer weights averaged 821 lbs the week of October 11, 2014. They had risen to a then record of 863 lbs the week of October 12 last year. Overall weights the same week in 2014 averaged 826 lbs. They reached a then record of 866 lbs in the October 12 week last year.
The cash live cattle trade last week was again slow to develop, even though packers were buying cattle for a full production week and did not buy many cattle the week before last. That week saw the 5-area steer prices average $194.81 per cwt live or $307.05 per cwt dressed. These were up eight cents per cwt and $1.41 per cwt, respectively, from the prior week. The week saw only a light reported cash trade of 35,250 head. Last Monday and Tuesday saw a very light trade in Iowa at $196-197 per cwt live and in Kansas at $192-193 per cwt live. A light trade developed on the Southern Plains Thursday at $195 per cwt live.
Boxed beef cutout values meanwhile increased as expected because of the two holiday-shortened production weeks. The Choice cutout in the Christmas week increased by $6.53 per cwt to $322.38 per cwt, while the Select cutout increased by $5.22 per cwt to $291.13 per cwt. The Choice cutout the first three days of last week added another $1.10 per cwt while the Select cutout added another $3.10 per cwt. The comprehensive cutout (cuts, grinds and trim) the week before last averaged $316.19 per cwt, versus $310.40 per cwt the week before that. Of note was that formula sales accounted for 65.5% of the total volume of 5017 loads.
Avian Flu Forces Egg Prices Up
Meanwhile, live hog and live cattle futures prices were the seventh and eighth best performers among commodities traded in the U.S. in 2024, according to an analysis by the Wall Street Journal published last Thursday. Cocoa futures led the way, up 178.24% on the year. Lean hogs were up 19.60% and live cattle were up 18.32%, says the WSJ. The same edition also reported how pricy breakfast foods are hitting consumers’ food budgets. It cited egg prices averaging $5.77 per dozen, up 146.6% from 2023. The deadliest outbreak of avian flu has hit the egg industry hard, reducing the domestic flock of laying hens by 3% or about 10M hens, according to USDA. The article also cites retail ground beef prices as being 20% higher since the start of 2023.
The price of eggs is likely to keep rising in the short-term as more cases of the highly pathogenic avian influenza (HPAI) emerge. The latest involved outbreaks in Ohio and California that each affected over 1M egg laying hens. USDA’s Animal and Plant Health Inspection Service (APHIS) on December 24 reported outbreaks across four states, California, Missouri, Oklahoma and Vermont. Within California, a flock in Riverside County experienced the greatest loss in birds, with 1.1M birds affected. San Joaquin County, Calif., also detected HPAI in a commercial egg laying flock, affecting 627,800 birds. Meanwhile, Adair County, Okla., reported two separate outbreaks among commercial turkey flocks, impacting a total of 130,000 birds.
Cass County and Dade County, Mo., as well as Franklin County, Vt., found HPAI among non-poultry flocks, says APHIS. A few days later, on December 27, four states once again reported outbreaks. The largest flock affected this time was located in Darke County, Ohio, with 1M egg laying hens culled. Sacramento County, Calif., reported 153,800 broilers impacted by the disease. A commercial turkey flock in Ottawa County, Mich., was also hit with HPAI, impacting 113,200 birds. Since the onset of the HPAI outbreak in February 2022, 128.91M birds have been affected, says APHIS.
LARGER FARMS HAVE LOWER COSTS
ECONOMIES of scale are present in every segment of the U.S. beef industry, from ranch to retail. The most profitable companies or individuals in each sector tend to be those with larger operations than others. That is because their size reduces their per head costs and enhances their buying and selling power, whether it is of cattle or beef. At the ranch level, larger beef cow-calf farms have lower costs per cow than smaller operations, according to an article in Amber Waves, a monthly magazine published by USDA’s Economic Research Service (ERS).
On beef cow-calf farms, cows deliver calves that are sold shortly after weaning or grown to a higher weight before sale, says ERS. These farms vary widely in cattle inventories and in their economic costs of production. As of December 31, 2022, USDA’s Census of Agriculture reported 622,162 U.S. farms had at least one beef cow in inventory. Of those farms, 79% had fewer than 50 cows and 1% had 500 or more cows. Although many factors can influence a cow-calf farm’s cost per cow, certain costs decline as herd sizes increase and costs are spread over a greater number of animals, says ERS.
Using cow-calf data from USDA’s 2018 Agricultural Resource Management Survey, ERS researchers estimated average costs of production per cow for five cow-calf farm size categories: 20–49 cows, 50–99 cows, 100–249 cows, 250–499 cows and 500 cows or more. They then divided average costs into three categories: (1) Operating costs. Including feed costs (purchased, homegrown, and grazed feeds); costs of animals purchased for backgrounding or stocker programs; veterinary services and medicine; bedding and litter; marketing; custom services; fuel; repairs; paid labor; and interest on operating capital. These costs vary in proportion to the level of production. (2) Ownership costs: Including the costs of capital recovery (similar to depreciation and interest) of buildings, machinery and equipment; taxes and insurance. (3) Opportunity and overhead costs: Overhead costs include expenses such as farm supplies and building maintenance. Opportunity costs are not cash costs but instead are the costs associated with lost opportunities when resources are devoted to cow-calf production.
Economic Costs Vary Widely
Total economic costs associated with U.S. cow-calf production for 2018 were estimated to range from $910 per cow for operations with 500 or more cows to $2099 per cow for operations with 20–49 cows, says ERS. These results show significant economies of size, advantages that farms have because of the size of their operation, with costs per cow declining with increased herd size. The major drivers of economies of size are ownership costs and opportunity and overhead costs, particularly the opportunity cost of unpaid labor. Ownership costs ranged from $218 per cow for farms with 500 or more cows to $407 per cow for farms with 20–49 cows. The primary driver for lower costs on larger farms was the lower per cow capital recovery cost associated with buildings, machinery and equipment. Ownership costs were spread out more as farms increased in size, resulting in lower ownership costs per cow, says ERS.
Opportunity and overhead costs per cow declined with farm size, from $1129 per cow for farms with 20–49 cows to $108 per cow for farms with 500 or more cows, says ERS. The primary driver for lower per cow opportunity and overhead costs on larger farms was the opportunity cost of unpaid labor, which ranged from $1065 per cow for farms with 20–49 cows to $77 per cow for farms with 500 or more cows. Much of unpaid farm labor typically comes from the operator and the operator’s family. If family sizes are the same for large and small operations, the smaller operation spreads its unpaid labor hours over fewer cows, resulting in a higher unpaid labor cost per cow. These results show clear labor efficiency gains associated with spreading unpaid operator and family labor over larger numbers of cows. ERS researchers did not find statistically significant differences for total operating costs among the five farm size categories. Total operating costs ranged from $552 per cow for farms with 50–99 cows to $615 per cow for farms with 250–499 cows, says ERS.