America’s ranchers are facing significant challenges as domestic cattle herds reach the lowest numbers in 70 years. The Federal Reserve Bank of Kansas City’s recent report highlights the struggles faced by cattle farmers, with many being pushed into the red due to higher interest rates. Ranchers are opting to sell off their herds rather than take on more debt, leading to a decrease in cattle numbers.
One of the key factors contributing to the decline in cattle herds is the flood of imports from Mexico and Brazil since 2015. This influx of cheaper beef has driven down prices and caused financial difficulties for American farmers. Many ranchers recall this period as “trying to catch a falling knife” as they sold their cattle into an oversaturated market.
Although cattle prices are currently high, ranchers are choosing to liquidate their herds instead of expanding them as expected in the cattle cycle. Long-term lack of profitability, widespread drought, and lending institutions’ refusal to support them further have all contributed to this trend. The loss of over 20,000 ranchers per year in the past five years, combined with the decline of 655,000 beef cattle operations since 1980, has led to a significant decrease in the number of cattle farmers.
The consequences of these challenges are already being felt by consumers, as beef prices have skyrocketed since 2020. Ground beef prices have risen from $3.80 per pound to $5.50 per pound as of June 2024. Agriculture economists predict that beef prices will continue to rise through 2024 due to tighter supplies. As farmers hold back cattle for breeding instead of sending them for slaughter, prices will initially increase. However, over the long term, prices are expected to stabilize as larger herds are rebuilt.
Despite the expectation that prices will eventually stabilize, American farmers are not currently rebuilding their herds. This continued selling of cattle into the beef supply chain, along with declining inventories of beef cows and heifers, indicates that the market and financial conditions are more favorable for selling rather than retaining cattle. This trend could lead to even greater shortages and price spikes in the future, further increasing America’s dependence on beef imports.
While the United States remains the largest producer of beef globally, it has become a net beef importer. Imports have traditionally been lower-grade frozen meats from Brazil, Australia, and New Zealand, but there has been a recent increase in imports of higher quality fresh cuts from Canada and Mexico. The repeal of country-of-origin labeling for beef and pork in 2016 has also made it challenging for consumers to know the origin of the beef they purchase.
Competition from imports has intensified the pressure on prices and profit margins for American ranchers. Additionally, recent interest rate hikes have put many ranchers into the red. Raising cattle is a lengthy and costly process, and higher interest expenses leave little to no profit for ranchers. The high costs of land, equipment, veterinary services, vaccinations, fuel, and feed further add to the financial burden.
The decline in cattle herds not only affects the livelihoods of ranchers but also poses risks to food security in the United States. The consolidation of food production into a smaller number of farmers and meat processors, combined with increasing dependence on imports, creates vulnerabilities in the food system. Any disruptions, such as wildfires or drought, can have catastrophic effects on food availability.
In conclusion, America’s ranchers are facing numerous challenges that are driving them to sell off their herds and leave the cattle business. Higher interest rates, competition from imports, and the decline in profitability have all contributed to the decrease in domestic cattle herds. Consumers are already experiencing the impact through rising beef prices, and the long-term consequences could include even greater shortages and increased dependence on imports. The fragility of the current food system further highlights the need for support and resilience in the agricultural sector.
