Softened and less volatile feed costs are boosting optimism after several years of elevated feed prices. Plentiful corn and soybeans have allayed concerns related to the largest cost for animal protein producers. While low feed costs typically usher in expansion, animal numbers have stalled in part due to processing capacity constraints, tight labor conditions and elevated capital costs.
Animal protein is not immune to global market disruptions with import restrictions including disease, tariffs and non-tariff barriers. Restrictions on imported cattle from Mexico to address New World Screwworm have disrupted cattle availability while HPAI continues to impact both egg production and U.S. poultry exports. HPAI was found in Brazilian commercial flocks for the first time in May, which threatened global opportunity or the poultry trade giant. The long-term effects are yet to be seen, but we expect continued talks on regionalization and vaccination.
Demand has remained favorable through mid-year despite headwinds from tariffs and inflationary pressures (Exhibit 1). While negligible, there is potential for softening on both the domestic and international fronts. U.S. red meat and chicken export volumes decreased by 7% YoY through the first four months of the year (Exhibit 2), but on a per- pound shipped basis, sales were up 6% YoY. The U.S. remains a net exporter of pork and broiler meat and has been a net beef importer since early 2023. Imports of lean beef continue to surge as U.S. consumers seek value while also appeasing their growing appetite for beef.
Overall, the animal protein segment appears to be healthy. USDA is currently penciling in roughly 2% growth in production, with consumption favoring more poultry this year.
Beef
Pasture conditions have been relatively stable to start the summer but are underperforming compared to prior year levels. Poor and very poor pasture conditions have averaged 32% compared to only 23% during the same period in 2024 (Exhibit 4). Rebuilding the nation’s beef cow supply is likely to be delayed under current conditions.
Although the less-than-ideal forage situation remains a deterrent to rebuilding, cow-calf margins should perform well again in 2025 as calf prices hit a record $405/cwt in May, up 25% YoY. Tight calf supplies have pushed feeder and fed cattle futures up at a similar pace, lengthening liquidity needs. Feeder cattle futures for the nearby August contract were trading at $302/cwt, up 18% from a year ago. Live cattle futures have surged to $227/cwt for the nearby August contract, up 25% from last year.
For the first time in 37 years, production of Prime grade beef this spring outpaced Select, an event last seen in April 1988. Beef producers have focused on improving meat quality over the last decade, boosting demand. According to data from the Bureau of Labor Statistics and USDA, the retail all fresh beef demand index hit a record 128 in 2024, coinciding with access to high-quality beef (Exhibit 5).
Cattle weights are gaining momentum and following seasonal patterns while they remain on feed for longer, averaging 872 pounds per head in the second quarter, 3% heavier than a year ago. These heavy U.S. cattle have required more lean beef imports from Brazil, Australia, and Canada to mix with grinds.
