MW Inflation, recession fears and the worst cattle shortage in over 70 years haven't dented beef demand. Here's why.

By Myra P. Saefong

USDA data show U.S. cattle inventory is at its lowest since 1951

"Beef. It's What's for Dinner."

That trademarked slogan was first used to help boost the American cattle industry in the 1990s, but is just as relevant today - as record-high prices for the food staple have failed to shake consumer demand, which stands at its highest in at least 20 years.

That resilient demand belies survey data that show consumers remain downbeat about the economic outlook, while overall sentiment remains well below pre-COVID levels despite a recent uptick.

Beef is "nutrient-dense, culturally rooted and versatile - from burgers and barbecue, to pot roasts and porterhouse steaks," said Conner Hackett, general manager at family-owned and -operated Stemple Creek Ranch, based in Marin County, Calif. "Its wide pricing spectrum, from budget-friendly ground beef to premium cuts, has traditionally made it accessible across all income levels."

"But 2025 is different," Hackett told MarketWatch.

All cattle and calves inventory in the United States was estimated at 86.1 million head on Jan. 1 of this year - the lowest since 1951, according to the U.S. Department of Agriculture, which releases its next biannual report on July 25. The head count fell from 87.2 million in 2024.

"Drought, inflation, labor shortages and market instability" have led to a long-term inventory decline, while land, feed, labor and processing costs have skyrocketed, said Hackett. "It's a full-system stress test, and that pressure is being felt across the supply chain."

Prices for beef across the country have climbed sharply on the back of those cattle supply issues, but that hasn't had much of an impact on demand.

The U.S. city average retail price for a pound of 100% ground beef was at $6.12 in July - the highest on record, based on data going back to 1984, according to the U.S. Bureau of Labor Statistics. That's up 11.8% from a year ago.

So while consumers can finally breathe a sigh of relief when it comes to the price of eggs, the cost of beef is now a big worry.

Strength in demand despite all of that harkens back to comments Federal Reserve Chair Jerome Powell made regarding a disconnect between what consumers say and what they actually do, in terms of spending.

Summer is grilling season and beef demand is seasonally high, said Jason Schenker, president of Prestige Economics - suggesting that record-high payrolls and wages may be playing a role in boosting demand as well.

Still, he could not come to any sort of conclusion as to whether "high beef demand during a season with typically high beef demand can prove or disprove anything about consumer sentiment one way or another."

'Resilient' demand

While the rise in retail beef prices itself was largely expected given the tightening supply-and-demand situation, the "resiliency" of U.S. consumer demand for high-priced beef was not, particularly given continued inflation across the board, said Darin Newsom, senior market analyst at Barchart.

Potential for a rise in unemployment fed expectations that consumers would shift to buying less expensive protein sources, he said. That doesn't appear to be the case, however - "at least not yet," Newsom noted - as weekly jobless claims have not grown much and monthly jobs reports have been stable over the spring and early summer.

In 2024, total beef disappearance in the U.S. - defined as the total amount of beef used in the domestic market on a carcass-weight basis - was at 28.7 billion pounds, according to the USDA. That's the highest, based on USDA data, going back to 2004.

On a per-capita basis, the USDA estimated beef disappearance at 59.1 pounds for 2024. It forecasts that figure to remain at the same level for 2025, and predicts a decline to 56.4 pounds per capita in 2026.

Stemple Creek Ranch's Hackett said that at his company - which sells grass-fed beef and lamb and pastured pork direct to consumers, as well as to local grocery stores and restaurants - overall sales are up year over year. "Sales are up even though prices have risen," he said.

Beef demand remains strong, he added, and many consumers are "reprioritizing where they put their dollars" - choosing to spend on "food they trust and producers they believe in."

Beef-cattle deficit

U.S. cattle producers have had to navigate some tough conditions over the last several years - including extended droughts in key cattle states, which forced many ranchers to sell off animals early "just to make it through," said Shelby Bass, communications manager at AgAmerica, a nationwide agricultural-land lender.

And more U.S. ranchers are nearing retirement than those entering the industry, she added, which could "squeeze the total U.S. cattle-herd count even further in the coming years."

Some cattle ranchers saw the record-high cattle prices back in 2024 as an "opportunity" to exit the business, Walter Kunisch, lead strategist at HTS Commodities, a division of Hilltop Securities, told MarketWatch. At the same time, there was a liquidation of female cattle that could have been used to breed more inventory, he noted.

The U.S. in 2025 is experiencing a 'sustained, acute, structural supply deficit of beef cattle.' Walter Kunisch, HTS Commodities

What we're seeing right now in 2025 is the "residual impact" from that - a "sustained, acute, structural supply deficit of beef cattle in the United States," said Kunisch.

A major source of cattle imports to the U.S. has also been sidelined.

The U.S. government started to restrict the import of animals originating from Mexico in November of last year because of a disease known as New World Screwworm $(NWS.AU)$ in southern Mexico. It's caused by an infestation of larvae from a certain parasitic fly that can lead to potentially fatal wounds and infections.

Mexico is the fourth-largest beef supplier to the U.S., and shipped 13% of U.S. beef imports in 2024, according to the USDA.

The U.S. suspension of cattle imports from Mexico "impacts beef supplies significantly," said David Maloni, president of Datum FS, a food-service supply-chain consulting firm. "It's unlikely that imports will fully resume in the near term, which will impact beef supplies at least into 2026."

That comes at a time when the U.S. has been relying heavily on imports - particularly from its top suppliers Australia, Canada and Brazil - to help satisfy some of the lost domestic production. Beef imports set a new record in 2024 at 4.635 billion pounds, which topped the previous record from 2023 by more than 24%, according to the USDA.

Lower cattle inventories have lifted futures prices for feeder cattle (FC00) and live cattle (LC00) on the Chicago Mercantile Exchange $(CME)$. Prices touched record intraday highs this week, according to Dow Jones Market Data.

"Brazil, Australia [and] New Zealand account for the majority of lean beef-trim imports that are used in hamburgers in the U.S.," said Maloni. The threat of additional U.S. tariffs on imports from these countries, potentially effective Aug. 1, could greatly impact already record-high prices for lean beef trim, which is a "major exposure" for the U.S. food-service industry, he said.

Relief could be many months away

As for cattle inventories, there's still some hope for a recovery, though that could be many months away.

Improved weather conditions can lead to better pasture growth, which in turn can lower feed costs and raise the supply of available cattle - leading to lower prices, said James Roemer, publisher of the WeatherWealth newsletter. Given recent rains in Texas, the biggest cattle-producing state, that dynamic could be possible six to 12 months from now.

Kunisch, meanwhile, said pasture conditions have started to improve, so larger cattle operators are starting to hold back female animals for future breeding.

What we're seeing right now are kind of the "green shoots ... of retention," he said - although holding back more of the female animals tightens the overall supply, he added, and can force prices for cattle in the cash market even higher.

So the market may see even higher cattle prices in the months ahead, said Kunisch, as that national "retention" of female cattle can keep supplies tighter for the next 24 to 36 months.

Overall, given the impact of reduced cattle supplies crossing into the U.S. from Mexico, combined with an incentive for U.S. ranchers to retain female animals, Kunisch said he expects to see beef supplies remaining tight.

If consumers continue to spend on the back of a stock market that is at record highs, beef demand may also increase or remain stable, Kunisch noted.

So while beef is pricey and is "not an economical protein solution," he said, retail prices aren't likely to see declines as we head into the holiday season - with Thanksgiving through New Year's Day being a key demand period for beef.

-Myra P. Saefong

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July 24, 2025 12:07 ET (16:07 GMT)

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