How have cattle herd sizes and feed costs influenced beef inflation?
Executive summary
Beef inflation in 2024–25 was driven primarily by a historically small U.S. cattle herd — inventories fell to multidecade lows (about 86–87 million head by early 2025), which pushed farm-level cattle prices up roughly 22–27% and wholesale beef up around 12% in 2025, according to USDA/ERS forecasts and sector analyses [1] [2] [3]. At the same time, several analysts point to falling feed-grain costs and abundant feed supplies that have partly eased producers’ input bills and supported optimism for herd rebuilding, even as tight supplies continue to sustain high retail beef prices [4] [5].
1. A shortage in the herd: the supply shock that underlies price gains
The central, repeatedly cited fact is a sharply smaller cattle herd that reached lows not seen since the 1950s; USDA/ERS projections put U.S. inventories at about 86 million head in 2025, a multidecade low that reduced beef production and is the primary upward pressure on cattle and beef prices [1] [3]. Multiple industry analysts and outlets link record-high cattle prices directly to this contraction: tight supplies pushed cattle and beef prices to record highs in 2025 and explain most of the retail inflation in the beef category [4] [6] [7].
2. How herd dynamics translate into retail inflation
Economic reasoning and official forecasts show the mechanism: fewer cattle reduce slaughter and beef output, which raises farm-level cattle prices; ERS data predicts farm-level cattle prices increasing about 22.5% in 2025 and wholesale beef rising roughly 12% in 2025 — figures that feed into the consumer-price increases observed for beef and veal [2]. News reports and market commentary point to beef-and-veal CPI increases far above overall food inflation, with one outlet noting the beef category up 14.7% versus food up 3.1% in a cited 12‑month span [8] [2].
3. Feed costs: a moderating influence, not the main culprit
Contrary to a simple “all inflation is input-cost driven” narrative, several analyses find that falling feed-grain costs and abundant feed supplies in 2025 are helping lower the cost of gain for cattle and are a reason some producers feel optimistic about rebuilding [4] [5]. FCC and other analysts explicitly state that “abundant feed supplies, and falling feed costs are all boosting optimism” for herd expansion prospects even as cattle prices remain historically strong [4]. Thus, feed costs so far have moderated producers’ margins and reduced one inflationary input, but they have not offset the price signals caused by scarcity of animals.
4. Why herd contraction happened — and why it keeps prices high
Reporting and industry commentary point to several causes of the contraction: drought, high production costs in prior years, and earlier industry shocks (pandemic-era processing disruptions) led producers to liquidate cows and heifers, cutting breeding inventories and delaying recovery [7] [9]. Those same dynamics create a persistence problem: cattle biology means it takes years to rebuild breeding herds, so even with incentives from high prices and cheaper feed, supply-side relief on retail prices is slow — analysts forecast it may take several years for increased production to materially soften prices [1] [8].
5. Near-term disinflation scenarios and policy signals
Forecasters and industry sources present competing near-term views. Some see herd expansion beginning or “nearing the end of contracting,” which could gradually ease price pressure into 2026–27 [4] [3]. Others stress that even if producers begin rebuilding, the biological lag means higher prices could persist for years and that import adjustments (e.g., increased imports or tariff changes) will move markets only modestly relative to domestic shortfalls [9] [8]. The American Farm Bureau and USDA analyses both note that imports at realistic scales are unlikely to meaningfully lower consumer prices immediately [9].
6. What’s missing from current public reporting
Available sources do not mention detailed, up-to-date quantified pass-through rates from wholesale beef to retail prices for late 2025, nor do they provide household-level consumption elasticity estimates that would precisely forecast how much retail beef inflation will fall as production recovers. Sources also do not provide a single consensus timetable for when herd rebuilding will be sufficient to return beef prices to pre‑2020 trends; instead, forecasts and commentary vary by institution [4] [1] [3].
Bottom line: shrinking herd size has been the dominant driver of beef inflation in 2024–25; lower feed costs have softened producers’ input bills and improved prospects for rebuilding, but biological lags and historically tight inventories mean elevated cattle and beef prices — and thus beef inflation at retail — will likely persist until herd expansion materially increases supply or imports scale up enough to fill the gap [1] [2] [4].