Bank of America analysts spoke with Oklahoma State University agricultural economist Derrell Peel, who offered new insight into the US cattle cycle. His key takeaway: the herd-rebuilding phase may not meaningfully begin to turn until near the end of the decade, suggesting elevated beef prices at the supermarket are here to stay.
The most important issue in the beef industry is when the cattle cycle will turn. The US beef cow herd is the smallest since 1961, while the 2025 calf crop is the smallest since 1941. Beef production is expected to decline by 4.5% to 5% in 2026 and continue falling through at least 2027, despite heavier carcass weights partially offsetting lower slaughter volumes.
Peel explained to Sara Senatore, a BofA Securities research analyst covering restaurants, protein processors, and food and beverage, that the beef industry has not yet seen the tightest supplies because meaningful heifer retention has only just begun.
He added that if ranchers begin saving heifer calves in 2026, those animals would be bred in 2027, calve in 2028, and only begin adding to supply in 2029 or 2030.
Peel explained more about when the cattle rebuilding cycle could turn:
The bottom line is, I don't think we're saving very many heifers yet. I don't think we're doing more than perhaps slowing the liquidation down, or stabilizing the herd. We're certainly not going to expand any in 2026. I think the prospects for expansion in 2027 are very limited at this point, because again we know that the supply of heifers that's already on the ground, that we would need to be breeding this year to enter the herd next year, just isn't there.
And so if we start saving heifers, which would really be heifer calves in 2026, we breed them in '27, they would calve in 2028, we're talking about 2029 into 2030 before those calves would be weaned and fed out and have an impact on beef production. So we're really looking at the end of the decade before we can change the path here.
And in fact, what it means is that in the meantime we have to save some additional heifers. We haven't yet seen the tightest supplies of this particular situation. We've got tight supplies, the feeder supply continues to decline with these smaller calf crops, but at some point we have to pull additional heifers out of that mix in order to retain them for herd rebuilding. We have not done that yet to any appreciable degree.
Cow calf producers are getting market incentives, returns are good. But we've been very slow to respond as an industry for, I think, a wide variety of reasons, that includes drought and financial conditions and demographic changes in the herd or in the producer population, and just a variety of things that contribute to that.
The upshot of it all, this is my final analytical slide, is that we think that prices will continue to go even higher. I would expect that heifer retention process to be what would put the peak in this thing. That peak will not happen, in my opinion, at this point in 2026. It will be at least into 2027. And there is a possibility that it gets pushed off even beyond that if we don't see some indications of heifer retention pretty quickly here in 2026.
So the short answer is the current situation will continue, and I think persist, and actually get a little bit more in terms of higher cattle prices. Now, that's all predicated on demand continuing as strong as it is. I don't see that changing at this point. There's certainly some potential threats out there that we're watching, but I don't see demand changing enough to prevent this.
So the short answer is the current situation will continue, and I think persist, and actually get a little bit more in terms of higher cattle prices. Now, that's all predicated on demand continuing as strong as it is. I don't see that changing at this point. There's certainly some potential threats out there that we're watching, but I don't see demand changing enough to prevent this.
The warning that the cattle cycle is still several years from a meaningful turn builds on our prior note that there are "no quick fixes" for historically tight supplies.
The structural fix is herd rebuilding, and Peel's timeline points to meaningful relief in beef production closer to 2029-2030, not anytime soon.
In other words, high supermarket beef prices are not a temporary squeeze. This is a new reality folks must understand: a broken cattle cycle that will take years to repair - and quality might lack...
That's why locking in high-quality beef now matters. While the Trump administration searches for ways to bring prices down (see here) and the industry waits years for herds to rebuild, readers can skip the junk at the supermarket and buy directly from our ranchers.
