USDA’s “Cattle on Feed,” issued on Friday, July 19, showed on- feed inventory at 101% of last year. But this does not tell the story, the real story. On-feed inventory in Texas and Nebraska is up 3%, but down 7% in Kansas and unchanged in Iowa. Market ready supplies in Nebraska are tight. The Nebraska show list this week is down 20,000 head from the previous week. The report also confirmed that the supply of heifers on feed is record high.

This data confirms that widespread heifer retention has not started yet. But with 40 percent of the nation’s pastures in good to excellent condition, my sources believe that retention will begin in earnest sometime this fall. When heifers are held back and not placed, naturally, placements are going to drop hard and fast. The math will change rather suddenly. In a few months, the concept of a plentiful supply of cattle in the feedlots will be long gone.

When the cattle industry expands the herd through heifer retention, it’s called the bullish whiplash effect. While the market signals of high cash steer prices and rising wholesale beef prices is encouraging producers to place more cattle in the feedlots, just the opposite is occurring. Heifers are held back for breeding and placements decline sharply.

Many analysts continue to worry about beef demand. They contend that consumers will simply walk away from purchasing beef. This has not happened, mostly because the demand for ground beef in the United States is highly inelastic. Increases in price do not correspond with similar decreases in consumption. This is not rocket science but basic economic 101 theory. Into the middle part of 2025, look for cash steer prices and wholesale beef prices to crank higher and into new all-time record high territory.

Traders need to be aware of the big picture facing beef. All three major beef exporting countries (Brazil, Australia and the U.S.) have beef contracting their herds at the same time. Australia, like the U.S., reduced their herd due to drought. Brazil, in response to powerfully strong Chinese beef demand, willingly sacrificed their heifers instead of holding them back for breeding. The global supply of beef is headed lower, and the supply of grain-fed beef is going to become a very scarce item in the months/years ahead. Nearly all of the beef produced in Brazil is grass fed and about half of the beef produced in Australia is grass fed. Whereas, nearly all of the beef produced in the U.S. is grain fed.

Over the next six to nine months, I visualize a surge in cattle prices and beef prices. Cash steer prices should move well north of $210. Choice beef should challenge $400.

Dennis Smith has been a livestock analyst and broker for 39 years. He publishes his widely followed evening livestock wire daily. For a free 30-day trial send an email request to [email protected]