A monthly column written for Beef Central by US meat and livestock markets commentator Steve Kay, publisher of US Cattle Buyers Weekly

THE rebuilding of the United States beef herd has scarcely begun, according to the US Department of Agriculture’s annual Cattle Inventory report released last week.

US beef cows on January 1 totaled 27.607 million head, down 1pc from a year ago. Beef replacement heifers on January 1 totaled 4.714 million head, up 0.9pc from a year earlier.

The only meaningful year-on-year increase in cattle numbers came in the number of dairy cows, which was up 2pc on a year earlier. All other categories of cattle were flat with 2024 or slightly lower. All US cattle and calves as of January 1, 2026 totaled 86.155 million head, 99.6pc of a year earlier.

Processing capacity

Uncertainty around US processing capacity is raising fresh questions about whether large-scale heifer retention is even necessary, as the industry looks toward rebuilding the cow herd, noted a report from RFD TV News in Lubbock, Texas on February 4.

Recent US processing plant closures and production cutbacks suggest slaughter capacity may shrink before expansion efforts fully begin.

According to analysis from analyst Don Close of Terrain, Tyson Foods’ decision to close its Lexington, Nebraska beef plant and reduce production at its Amarillo, Texas, facility (both on January 20) has altered the balance between fed cattle supplies and slaughter capacity.

With fewer cattle needed by packers, feedyards may be able to meet demand using existing inventories, reducing the need to bid aggressively for feeder cattle, he told RFD.

USDA data continues to show that heifer retention has not meaningfully started, Don Close said.

Heifers on feed remained flat through the third quarter of 2025, confirming that producers have not yet shifted toward herd rebuilding. At the same time, years of cow liquidation across both the beef and dairy sectors have left an aging herd with limited replacement depth.

Mr Close warned that further reductions in processing capacity could discourage expansion, locking the industry into tighter supplies and slower recovery.

As noted, numbers in most cattle categories on January 1 were flat with a year earlier. USDA estimated the 2025 calf crop at 32.9 million head, down 2pc from the previous year’s calf crop.

Calves born during the first half of 2025 were estimated at 24.2 million head, down 2pc from the first half of 2024. Calves born during the second half of 2025 were estimated at 8.7m, 26pc of the total 2025 calf crop.

Big losses by packers

Meanwhile tight cattle supplies caused processing giant Tyson Foods’ beef segment to have an operating loss of US$319 million in its 2026 first quarter ended December 27, compared to a US$26m operating loss in 2025’s first quarter.

Tight feedlot supplies also helped cash live cattle price surge from late January to the first week of February. Live prices averaged US$241.31 per cwt, while dressed prices averaged US$378 per cwt.

These were the highest weekly prices since the first week of September last year and were at an all-time record high in Kansas and Texas. USDA on January 16 forecast that the 5-area steer price this quarter would average US$232 per cwt live, although January’s big advance likely will raise this average.

Strong beef demand continues, but will it last?

Meanwhile, strong US beef demand continues to be the biggest surprise of 2025, and now into 2026. But the industry enters its two weakest demand months of the year, so all eyes will be on how consumers respond to record high prices in the retail meat case.

The December retail All Beef price averaged a record US$9.55 per pound, up 15c/lb from November’s US$9.48 and up 18.2pc from December 2024.

The December USDA Choice beef price averaged US$10.08 per pound, the same as in November but up 20.3pc from December 2024.

One can’t help but feel that a lot of consumers in the next two months will find that most beef items are out of reach, price-wise, and will turn to much cheaper pork and poultry, whose prices in December were lower than a year earlier.

Exacerbating the price impact is the fact that consumer confidence in the economy plummeted in January. The Conference Board’s Consumer Confidence Index fell by 9.7 points to 84.5 from an upwardly revised 94.2 in December.

A 5.1-point upward revision to December’s reading resulted in a slight increase last month, reversing the initially reported decline. However, January’s preliminary results showed confidence resumed declining after a one-month uptick, the board said.

Confidence collapsed in January, as consumer concerns about both the present situation and expectations for the future deepened, said Dana Peterson, the board’s chief economist. All five components of the Index deteriorated, driving the overall Index to its lowest level since May 2014 (82.2), surpassing its COVID pandemic depths, he said.

Yet consumer incomes will be key to maintaining or improving US beef demand going forward, says analyst Bob Wilson of HedgersEdge.com.

The pace of inflation held steady in December from the previous month at an annual rate of 2.7pc, well off the 2022 peak of more than 9pc. But on a line item basis, groceries and meals away from home showed some of the largest increases during December, as consumers embraced the holidays.

Incomes also rely on jobs. When tallying jobs for the year, 2025 had the lowest pace for average monthly job growth since 2003, excluding the two recessionary periods since the turn of the century, he says.

This split-screen view will keep consumers edgy and cautious with their money, says Wilson.

The upcoming payments for Christmas bills and the spike that is coming for heating bills following the most recent arctic storm will place further constraints on discretionary spending. February can be a quiet time at the retail beef counter, he says.