Editor’s note: This article appears courtesy of John Lovett with the University of Arkansas System Division of Agriculture.

Beef prices are projected to continue increasing as U.S. beef production declines with no signs of a cattle herd rebuild.

At the start of the year, U.S. cattle inventories were at their lowest since the 1950s, and the U.S. cattle industry has been in liquidation mode since inventories peaked at 94.7 million head in 2019. The nation’s beef herd has decreased by 8 million head of cattle since that time.

“Liquidating inventories is one phase of the cattle cycle, a 10- to 12-year pattern of expanding and contracting cattle numbers driven by changes in producer profitability and worsened by drought,” said James Mitchell, an extension agricultural economist who focuses on livestock for the University of Arkansas. “The impacts of historically tight cattle numbers are being felt at every stage of the beef supply chain.”

According to the U.S. Drought Monitor, as of mid-December, about 80% of Arkansas is considered “abnormally dry” with about 45% of the state registering in “moderate drought” and a large pocket of northern Arkansas in “severe drought. About 70% of the Mid-South — Arkansas, Louisiana, Mississippi, Oklahoma, Tennessee and Texas — is “abnormally dry” with about 13% in “severe drought,” and 4% in “extreme drought,” including large areas in south-central Oklahoma and southern Texas. 

Mitchell is also associate director of the Fryar Price Risk Management Center of Excellence and an assistant professor in the department of agricultural economics and agribusiness. The Fryar Center is a unit of the Division of Agriculture and Bumpers College.

In the center’s 2025 Markets in Review, using U.S. Bureau of Labor Statistics, the Fryar Center notes that retail beef prices averaged $8.56 per pound through August 2025 — up 60 cents per pound from the same period last year.

Beef has been running about four times more expensive per pound than chicken over the past two years, and as domestic protein demand remains relatively strong, poultry stands to gain more ground against beef and pork, the report stated.

“Understandably, these higher prices have renewed concerns about consumer demand,” Mitchell said. “There is some evidence that beef has lost price competitiveness in 2025.”

Stalled herd rebuild

Even though market fundamentals suggest there are incentives to begin rebuilding the U.S. cow herd, the signals for expansion through heifer retention remain muted, Mitchell said.

Followed by a fourth-quarter slide of 19%, beef cow slaughter for the year of 2025 is down by 17%. However, information Mitchell finds more informative than slaughter totals alone is “slaughter relative to the size of the beef cow inventory.” And relative to Jan. 1 beef cow inventories, Mitchell said the nation is on pace for beef cow and heifer slaughter to equal about 42% of the beef cow herd.

“Historically, based on this model, this rate would need to fall below 40% before we would expect a year-over-year increase in beef cow inventories,” Mitchell said. “Heifer retention is the key to longer term cattle and beef supply expansion and that is a multi-year process.”

Structural constraints, input costs and financial considerations will also likely delay a broad-based recovery in beef cow numbers, he added. The herd rebuild, when it does occur, will be “slow and intentional, supporting cattle prices through 2027-2028.”

Price points and supply

The Fryar Center Markets in Review report points out that Arkansas steer prices for 500-to-600-pound calves have averaged $371 per hundredweight year-to-date through November, up 29% from the same period in 2024 and more than double the 2019-2023 average. Arkansas feeder cattle prices for 700-to-800 pounders saw a 32% increase from last year, averaging $314 per hundredweight.

Nationally, cattle on feed to be slaughtered have averaged about 11.4 million head through September, a 1.4% drop compared to 2024 over the same period.

“Despite longer days on feed and record dressed weights, tighter cattle supplies are affecting the number of cattle placed on feed and those leaving feedlots,” Mitchell said.

The cattle harvest, or fed cattle slaughter, in 2025 has averaged 6.1% lower compared to 2024. Together, these trends have contributed to lower beef production, Mitchell noted. The most recent World Agricultural Supply and Demand Estimates from the U.S. Department of Agriculture forecast 2025 beef production at 25.8 billion pounds, or 1.2 billion pounds below 2024 production.

‘Policy uncertainty’

One of the biggest factors to watch in the cattle market for Mitchell called “policy uncertainty.”

“We’ve already seen how sensitive cattle markets are to it,” he said.

For example, even though most analysts agreed that an increase in beef imports from Argentina and reopening the U.S.-Mexico border livestock trade would not meaningfully change beef or cattle market fundamentals, the announcements still triggered a three-week selloff in cattle markets, Mitchell said.

The U.S.-Mexico border was first closed to live animal trade in November 2024 following a detection of New World Screwworm in Mexico and has been mostly closed since then. Between February and May 2025, when the border was briefly open, weekly feeder cattle imports from Mexico averaged 14,900 head — about 43% lower than the 2020-2024 weekly average.

With the border still closed to livestock trade due to New World Screwworm concerns, Mitchell said even if an agreement were reached, “a phased reopening would somewhat limit any increase in supply that could disrupt U.S. cattle markets.” Since many of the cattle that would have been exported while the border was closed have already likely entered other marketing channels, Mitchell said there is little evidence of a significant backlog of Mexican cattle awaiting import.

Also, the proposed increase to quadruple imports from Argentina to about 132 million pounds would account for less than 1% of U.S. demand, Mitchell noted.

With low domestic production and historically low cattle numbers, the U.S. has been importing larger-than-normal volumes of beef. The September World Agricultural Supply and Demand Estimates showed 2025 U.S. beef imports at 5.4 billion pounds, or about 18.4% of total U.S. beef consumption, use and loss, Mitchell said.

“It is important to recognize that ‘beef’ is not a single product but a diverse portfolio of products serving different market segments,” Mitchell said. “The U.S. imports primarily lean manufacturing beef used in ground beef production, while the domestic industry produces a larger share of grain-fed, high-quality cuts.”

As a result, he said imports tend to supplement the domestic ground beef market rather than directly compete in the U.S. grain-fed beef market, he said.