U.S. beef futures recently touched a record high, alongside U.S. consumer prices for products like ground beef. The U.S. cattle herd has been continually shrinking since 2020 and beef production is now declining as well — expected to fall by more than 2 billion pounds from 2023 to 2024.

In response to several waves of drought that swept over the Midwest throughout the past couple of years, ranchers have been forced to cull millions of beef cows. Water shortages appear unlikely to show immediate improvement in most parts of the United States where cattle farming is prevalent. USDA data indicates pasture and range conditions are improving moderately in the beef cow powerhouse of Texas, but other large cattle-producing states are experiencing a deterioration.

The U.S. cattle herd is currently at its thinnest level in eight years, going back to 2015, wiped out by persistent drought conditions throughout the Southwest that has led to sustained culling. The cattle population peaked in 2019 but has slipped into an ongoing downtrend in the years since. Along with an apparent inelasticity in the demand for beef — shrugging off large price gains — the cattle herd shrinkage helped to push live cattle futures to all-time highs this year.

Widespread cattle culling began in 2020, largely due to supply-chain disruptions that emerged in the wake of COVID-19 lockdowns, which shut operations at slaughterhouses and meatpacking plants. Despite those shutdowns, beef futures declined to a decade-low due to the perceived economic impact of the pandemic. Once the smoke began to clear and operations in the beef industry were able to ramp up again, ranchers were left to deal with a two-fold problem of weak prices and an inflated herd of live cattle that had built up in the time that slaughterhouses were shuttered. The latter variable faced the industry with the potential for an even deeper and more sustained downturn in pricing, which justified the culling.

The United States was responsible for almost 22 percent of the world’s beef production in 2022, the largest share of any single nation, and what happens with the cattle population there is going to reverberate through prices across the globe. Large swathes of the U.S. Midwest have been affected and continue to feel the sting of dryness, struggling with several phases of drought since 2020. Though fairly widespread, with states such as Nebraska, Missouri and Kansas, all the way up along the Great Plains reporting drought conditions, the situation has been particularly severe in Texas and Oklahoma recently, the two largest states in the nation by number of beef cattle, with Texas and Oklahoma boasting 4.5 million and 2.1 million cows, respectively, only slightly less than the cow population of the next four largest states (Missouri, Nebraska, South Dakota and Kansas) combined.

This article was excerpted from a report researched and written by McAlinden Research Partners, which can be accessed here.