The 2025 Cattle Market: Higher Stakes in Raising Steaks

How can Illinois cattle producers hang on to high profits in a high – and potentially volatile – cattle market?

By Betty Haynes

Beef producers across the country are asking the same question going into 2025 – how long will prices stay high?

Lance Zimmerman, Rabobank senior beef analyst for North America, says the fundamentals suggest beef prices will remain strong into 2025, and even into 2026 and 2027.

How can this be?

The U.S. beef industry is in an environment where beef demand has been increasing at about one and half percent on average per year since the late 1990s. During the same period, beef supply has been at a steady decline.

Zimmerman says if demand were to increase but supplies remained steady, he’d expect prices to increase. Conversely, if supplies declined but demand remained steady, prices would also increase.

“We have two factors working at the same time that are very price supportive,” Zimmerman says. “Over the last 30 years we’ve created an environment where on average every single year, we should generally expect prices to go up.”

However, that hasn’t been the case thanks to market volatility from factors like competing protein surges, trade implications, recessions, the COVID-19 pandemic, infrastructure changes, and processing capacity.

“As we look to 2025, I think we can operate under the base assumption that prices are going to continue to go higher,” says Zimmerman. “It’s difficult to forecast how much and at what range prices will increase.”

Zimmerman forecasts 2025 calf prices to land around $345 per hundred-weight and fed cattle prices to average $195 per hundred-weight.

The challenge, he says, it that the futures market has been more discounted than what the fundamentals suggest for the end of 2024 and beginning of 2025.

“We have this saying in the marketplace that you have to feed a bull market,” he says. “In other words, you have to feed a market with good news for prices to continue to move higher.”

Several headwinds are creating pause for traders in Chicago to have the same optimism as the fundamentals suggest, such as:

• Feedyard inventories remaining strong

• Concerns about highly pathogenic avian influenza in dairy herds

• Inflationary concerns chipping away at consumer income

• The impeding election creating an environment of unknowns

“It doesn’t matter which presidential candidate we’re talking about – they both are presenting policy issues that offer challenges if you’re in the beef industry,” says Zimmerman. “One side of the ticket is talking about increasing tariffs and the potential of a trade war, the other side is talking about instituting policies to get the high price of food under control.”

Advice for cow/calf producers

Rollin Head, cow/calf producer from Blue Mound, Ill., says a high market creates a balancing act for cattle producers.

“Cattle guys seem to be the ones that complain when cattle prices are low because they aren’t making any money and then also complain when cattle prices are high because they can’t buy back in,” says Head.

This year and next, he’s keeping a close eye on his margins in an attempt to keep costs low as prices inch higher.

“We try to utilize all the feedstuffs we have available through an ADM, Tate and Lyle, and local elevators to keep our cost of production lower,” says Head. “We’ve also had good luck grazing cover crops and keeping cows on pasture as long as we can.”

Since cow prices are higher than ever, Head says he’s culled his herd pretty hard.

“We’ve been selling cows with bad feet, bad utters, and bad attitudes,” says Head. “Our cow numbers are down a little bit compared to what they were two or three years ago, but the quality of calves has undoubtedly gotten better.”

On the flip side, for those who don’t want to cull, older cows are still profitable.

“If you can afford to keep them, older cows that are still sound and functional have most likely paid for themselves many times over,” says Head. “I’ve still got a pasture full of aged cows right now because even if they have later born calves, they’re still super valuable.”

Head says one of his biggest pieces of advice to capture top end of the market, is not to undervalue cutting bull calves or practicing good vaccine administration.

“Give your shots, vaccinate your calves, cut your bulls, and have heifers conditioned and bunk broke before you take them to market,” he explains. “You could be leaving $20 a hundred-weight on the table for things that are they’re cheap and easy to do.”

The good news is, Zimmerman adds, high prices create an opportunity to sell steers and retain heifers.

“My encouragement to producers is instead of trying to buy a bred female today, maybe try to develop one of them you already have on the ranch as a heifer calf and take that animal instead of selling it,” says Zimmerman, explaining that producers can make the decision later to either keep as a replacement heifer of to sell her as a feeder heifer.

Advice for cattle feeders

Zimmerman says seasonal trends work eight out of every ten years, and seasonals suggest feeder prices will improve into the first and second quarters of 2025.

Mike Martz, cattle feeder and grain farmer from Maple Park, Ill, says he’s optimistic about feeding cattle in the coming years. He’s excited about the influx of consumers cooking beef at home after the pandemic, and Aurora Packing Company’s 2025 expansion in Aurora, Ill.

“I’m encouraged in Illinois that Aurora Pack will be finished with their new building and new packing plant by mid-2025,” says Martz. “They’ll go from 425-head capacity to about 1200-head per day. That’s good news for producers in the Midwest, since we’ll have another source for beef.”

Keeping costs low and diligently managing risk are always top of mind for Martz.

“It’s important to make good purchases on your feedstuffs – whether it’s on corn or byproducts,” says Martz. “Every penny adds up into dollars. You have to watch what falls through the cracks.”

For him, the buy is half the sale.

“As a producer, you have to watch your costs on both ends,” says Martz. “What you buy them for, what you put into them, and then try to do the best job you can marketing the cattle.”

Martz suggests finding a reliable source to get plugged into market trends, like:

• Illinois sale barn reports

• CattleFax reports or memberships

• A paid and trusted market analyst

“The more knowledge you have, the more comfortable you are,” he adds. “I try to trade cattle every week to get in a rhythm for what the market is doing.”

Zimmerman agrees on the feeder side, that risk management will be more important than ever moving into the coming year.

“Utilize risk management tools that are in front of you to minimize your losses and allow the market appreciation that we think should seasonally occur to develop,” says Zimmerman. “Then lock in some higher prices once you get to a profit incentive that you’re comfortable with.”

Looking to the future

The biggest thing Zimmerman says to keep in mind in future years, is that the herd rebuilding stage looks different for everyone.

“Over time the optimal scenario is you always have a few cows and few stocker cattle,” says Zimmerman. “Then you can flex in and out of the numbers of each operation as cyclical tendencies develop.”

In the current phase where grain prices are softer and cattle prices are higher, certain aspects of the cattle business even offer better opportunities for profit than others in the short run.

“Perhaps the best opportunity short-run is to develop feeder cattle and add weight to cattle for a few years until heifer numbers rebuild and prices go down,” says Zimmerman. “When that happens, you can lean more into the heifer side of the equation, developing more of cows and whittling down on the feeder side.”

A systems approach, Zimmerman says, will be the key to growth in 2025 and beyond.

“Don’t get caught up in the idea that you’re just a cattle feeder or just a cow/calf guy or just a farmer,” says Zimmerman. “Think about how each aspect of the operation can ebb and flow and benefit the other segments of the farming enterprise. If you think of each one as a cog in a system, you’ll find more success longer term.”