Ground beef prices are at record highs, while the U.S. cattle and calf herd has fallen to its lowest level in 50 years. Understanding these dynamics, we’ve been carefully watching for a cyclical low in the 12-year herd cycle, a bottom that now appears to have been reached.
New comments from Tyson Foods CEO Donnie King during Monday’s earnings call point to a long-awaited herd rebuilding cycle set to begin “in earnest” next year, though any meaningful supply recovery likely won’t materialize until 2028.
King told analysts that one of the first emerging signs that a rebuilding cycle nears is that ranchers are starting to retain heifers for breeding operations.
“We’re poised to capitalize on tremendous opportunity ahead of us,” the CEO said, adding, “Cattle availability should improve in the coming years.”
America has slid into a beef supply crisis, pushing retail ground beef prices above $6 per pound. Years of herd reduction, driven mainly through elevated inflation, high feed costs, and adverse weather across the cattle belt, have shrunk the nation’s herd to its smallest size since the early 1970s.
This has severely impacted processor profits, with Tyson’s beef division posting a $151 million loss in Q3, its seventh consecutive quarterly loss.
In June, 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 key takeaway is that beef prices are likely to continue rising, driving further demand substitution toward chicken. While the upcoming herd rebuilding phase is a welcome development, it will take years to play out. Only once the recovery is well underway will beef prices peak and begin to reverse meaningfully.
Loading recommendations…