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Ranchers cautiously rebuild cattle herds after drought

eases

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Consumers have paid record beef prices due to low supply

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Meatpackers want larger herds to reduce cattle prices

By Tom Polansek

August 7 (Reuters) - Nebraska cattle rancher Craig Uden

bought 200 extra mother cows and their babies over a few weeks

in May to expand his herd as dry weather gave way to rain that

rejuvenated land used for grazing.

In South Dakota, Troy Hadrick kept 16 more young female

cows, known as heifers, on his farm than he did last year to be

used for breeding, rather than sending them to be slaughtered

for beef.

More than 1,400 miles south in Texas, the biggest

cattle-producing state, Fausto Salinas was also preserving

heifers to increase his herd.

In major U.S. livestock regions, some ranchers have slowly begun

taking the first steps to boost cattle production after the

nation's inventory shrank due to a years-long drought that dried

up pasture land used for grazing and hiked feeding costs.

By the beginning of the year, the herd had dwindled to 86.7

million cattle, the smallest number for the time period since

1951, according to U.S. government data.

When grass failed to grow on pasture land that turned from

green to brown and as feed grains became too expensive, ranchers

began to ship off more cattle to be slaughtered. Some producers

searched miles away for hay to nourish their remaining animals.

The drop in supply drove U.S. food companies to increasingly

import beef from other countries, including Australia and

Brazil.

Though in its early stages, the herd expansion is now a sign

of hope for consumers shelling out for expensive steaks and for

meatpackers losing money buying high-priced cattle to slaughter.

"Cattle availability should improve in coming years," Tyson

Foods ( TSN ) CEO Donnie King said during an earnings call this

week.

Farmers' cautious plans to rebuild mark a turning point

after a continuous downsizing of the herd for six years in a row

pushed beef prices to record highs in 2025.

Cattle prices reached records too, slashing the profits of

processors like Tyson and providing income for farmers who also

grow grains and have struggled to turn a profit from selling

crops.

Cattle production is the nation's most important

agricultural industry, according to the U.S. Department of

Agriculture, which said the sector consistently accounts for the

largest share of total cash receipts for farm commodities.

After delays due to persistent dryness, improved rains are

motivating the expansion, along with expectations that cattle

prices will remain lofty during the long rebuilding process,

ranchers said.

In Nebraska, the second biggest cattle-producing state, the

portion of the herd in areas suffering from drought dropped to

19% in late July from 79% two years earlier, according to the

U.S. Drought Monitor.

Near Cozad, a city of 4,000 people where Uden works with his

son-in-law, rains have not quit since starting around Mother's

Day in May, Uden said. Grass conditions look the best since

2011, he added.

The dramatic improvement comes as a record U.S. corn harvest is

expected to boost available feed supplies.

"Everything has kind of fallen into place," said Uden, 64.

"The cattle will have plenty to eat this year."

Ranches in South Texas also benefited from one of the

greenest summers in years, a welcome reprieve after the

punishing drought turned forage brown and dry and killed some

cattle.

"Right now, we're in the process of rebuilding," said

Salinas, a rancher in Rio Grande City, Texas, who sold cattle

during the drought.

TIGHTER SUPPLIES

When ranchers retain heifers, beef production temporarily

slows because the animals are not being sent to be slaughtered;

it will also likely push meat prices even higher before they

come down, agricultural economists said.

Consumers have shown resilience to the climbing cost of

beef, but increased prices will test demand, they said.

It takes about two years before beef output rises after

ranchers make initial moves to expand because that is how long

it takes to raise full-grown cattle, ranchers said.

U.S. cattle and beef supplies are set to decline even further

after President Donald Trump's administration halted imports of

Mexican livestock in July to keep out New World screwworm, a

devastating pest.

U.S. beef imports from Brazil, a key supplier of meat used to

make hamburgers, are also expected to fall after Trump imposed a

50% trade tariff on Wednesday.

MEATPACKERS LOSE BIG

Beef producers such as Tyson and Cargill have waited years

for ranchers to begin rebuilding herds because companies must

increasingly compete with one another to buy limited supplies.

Processors were losing about $300 on each head of cattle they

slaughtered on Tuesday, according to livestock marketing

advisory service HedgersEdge.com.

Farmers have worried a processor may shutter a beef plant

due to hefty losses, though Cargill told Reuters it had no plans

to do so.

"It's not overwhelmingly glaring that, 'Hey we're starting

to rebuild the cow herd,' but I think there are quite a few

signals," said Jarrod Gillig, senior vice president of Cargill's

North American beef business.

For one, strong prices for heifers at a major video

livestock sale in July signaled the animals will be retained on

farms, Gillig said.

In rural feedlots, about 4.2 million heifers were being

fattened for slaughter as of July 1, down 5% from 2024,

according to USDA data. The decline likely reflects that

ranchers are keeping at least a few more heifers on farms to

reproduce, analysts said.

Tyson said a 16% drop in beef cow slaughtering from January

to June was another early indicator of ranchers retaining

heifers on their farms. The meatpacker reported cattle costs

climbed by about $560 million in the quarter that ended on June

28, compared to a year earlier.

Herd rebuilding will begin in earnest next year, and the

beef business will see benefits in 2028, King said.

DIFFICULT DECISION

Ranchers who retain heifers must make a difficult decision

to forgo immediate profits from selling cattle for slaughter in

a bet that prices will stay high. Many are cautious about

passing up the opportunity because they remember when prices

tanked following a rapid production increase in 2014.

High interest rates also discourage farmers from expanding

operations.

Hadrick, 49, said he would have liked to hold back more than 16

cows at his farm in Faulkton, South Dakota, but he was spooked

by a lack of moisture earlier this year. High cattle prices

encouraged him to expand a bit now that his son has returned

home from college and provides extra help.

"The market's screaming for more cattle," Hadrick said.

"We're dipping our toe in."