AUSTIN, Texas (DTN) -- The lowest cattle supply is expected to hit in early 2026 and CattleFax CEO Randy Blach said we are in the eye of the storm when it comes to the cattle cycle.

Blach spoke to the attendees at the Certified Angus Beef Annual Conference, held Sept. 24-26, 2025. He said the closed border with Mexico and tariff deals slowing beef exports are small factors in the overall supply being so low. "The outlook is the same," he said.

TIGHT CATTLE SUPPLY ON THE HORIZON

Cow slaughter was at a high in 2022 and Blach said producers are not reducing herd numbers at this point, but they also aren't growing them. Current cow slaughter is down 30% from the high three years ago, but lean beef is still in demand.

"Drought continues to pressure a herd rebuild. Some ranchers are starting to retain more heifers. We expect a heifer or cow inventory increase of 300,000 head in each of the next two years," he added.

But not a steep increase like 2014 when the fastest regrowth of the herd was seen after drought caused a reduction. He said higher interest rates are one reason for the slow increase.

REBUILDING THE HERD

Even though the cow herd has been so low, there has been a change in utilization of beef semen used in dairy herds to help provide more beef-type cattle for feedlots.

Blach said while the cattle that come to the U.S. from Mexico don't usually produce the highest quality beef in this country, a reduction of 1 million head has had an impact on both inventory and prices.

"The markets are pricing the tight supply now. That's what I mean when I say we are in the eye of the storm right now. We may be here for three months, it may take six months, but we are in the middle of it as we speak," he said.

Slaughter numbers continue to be 43,000 head fewer per week than in 2022. He expects the cattle on feed numbers next year to be even lower than what has been seen in 2025.

"If you go back the last five cattle cycles -- the cattle cycle is typically 10 to 11 years long. We go through the phase of the cattle cycle when numbers are rebuilding and we see the markets go up for five to six years," Blach said.

In 2020, he predicted a price peak to happen in 2025. The lowest supply that will be seen in harvest numbers will be in 2026. Price peak could actually be seen before the low in supply. The only other time he saw this happen is in 2003 when the Canadian border closed due to bovine spongiform encephalopathy (BSE) discovered in a cow there.

CHANGING BEEF PRODUCTION AND DEMAND

Meat supplies have stayed somewhat constant due to an increase in carcass weights. The average carcass weight for 2024 was 927 pounds and that has increased to 944 pounds for 2025. The 5-year average is 909 pounds. The increase is expected to continue as supplies are tighter to provide more meat for consumers.

"The low in slaughter will be seen in 2026 because of the closed border and tariff impact, besides the inventory lows," he said.

Ground beef demand continues to be high, leading to more need for lean beef. This has led to more chuck being ground up and this also means more lean beef will be imported to meet this demand. Exports typically add $450 per head in value, but Blach said when supplies are tight, exports are down, and that value goes down some too.

QUALITY IMPROVEMENTS BOOST BEEF PRICES

Beef demand is currently at a 40-year high and has stayed stable.

"Looking back to the 1980s, we lost 53% of beef demand because the product wasn't very good," Blach said. "It's taken time to shift the quality. That quality has also helped increase the price for beef. If we had the same quality and demand as 40 years ago, the price would be $1,070 lower on average."

Blach said the quality progress in the past 20 years has been a testament to cattle producers making genetic improvements in their herds. A 28.6% increase in choice and prime carcasses has been seen from 2005 to 2025, while a 23.3% decrease has been seen in select carcasses at the same time.

"We should be able to move the needle on low choice to get more in the high choice and low prime quality grade soon," he said. "The market tells us we need more high-quality beef."

Profitability in the beef industry is at an all-time high. Over the past 12 years, the trend has moved up, with the most profits seen in different sectors at different times. Currently, the cow-calf sector is seeing the best profitability, but overall, the average is $600 per head.

Jennifer Carrico can be reached at jennifer.carrico@dtn.com

Follow her on social platform X @JennCattleGal

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