The latest USDA cattle report shows America’s cattle and calves herd population has fallen to 94.2 million, its lowest mid-year level since 1973. The nation’s shrinking herd size has pushed retail ground beef prices to record highs. While talk of a herd recovery cycle may be premature, Goldman Sachs analysts are eying a cyclical low in the cattle cycle.
Bloomberg notes that while improved pasture conditions and higher beef prices at supermarkets and butcher shops have sparked some speculation about an incoming herd rebuilding cycle, there’s no clear evidence that this may materialize soon.
Heifer numbers in animal feeding operations (known as feedlots) across the Midwest, used by the industry to feed a high-energy diet (mostly grains like corn … and growth-promoting hormones) to rapidly build weight before slaughter, have remained stable, but beef cow numbers continue to decline. This indicates stabilization, but not a recovery. And in any recovery scenario, the shape will unlikely be a “V”.
Derrell Peel, a professor of agricultural economics at Oklahoma State University, commented on the latest USDA numbers. He said the data offers “very little indication of much herd rebuilding or anything very aggressive.”
Peel noted that while the number of heifers in feedlots remains stable, their ratio to steers suggests ranchers are not holding back females to boost breeding operations.
“We are probably stabilizing cattle numbers, but we’re not growing yet,” he said.
Last month, Goldman analysts Leah Jordan and Eli Thompson signaled that the 12-year cattle herd cycle has likely reached a cyclical low, suggesting a rebuilding phase may be approaching. However, any eventual recovery is unlikely to be a sharp “V” and will more likely take the shape of a prolonged “U”.
“We also believe the cyclical low in beef profitability is creating an attractive entry point for patient investors in Buy-rated TSN,” the analysts noted.
The rebuilding phase will be rocky for the four mega-corporations (JBS, Tyson Foods, Cargill, and National Beef) that control 80% of beef processing in America because, as Senator Hawley warned in late June at an antitrust hearing on Capitol Hill, scrutiny on the meatpacker “monopoly” has begun, calling for the urgent need of more competition.
The path to rebuilding begins with revitalizing regional microprocessing plants nationwide and establishing a more resilient, decentralized food supply chain that’s less vulnerable to disruptions.
Next month, the ZeroHedge Store will unveil a refresh, featuring new ranches and MAHA-oriented products, including microplastic-free items and those proudly made in the USA.
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