Smaller Cattle Herd Creates Market Volatility

By Bernt Nelson

Key Takeaways

• The U.S. cattle herd continues to shrink. The January U.S. Cattle Inventory report shows the cattle inventory on Jan. 1, 2026, is 86.2 million head, down 300,000 head or 0.3% from 2025. This decline indicates that the cattle inventory is still in the contraction phase of the cattle cycle.
• Cattle inventory will likely not expand until at least 2028. The combination of fewer beef cows and a declining calf crop means the 2026 calf crop will likely continue to trend downward because there are fewer calves available for the breeding herd, even if more heifers are kept for breeding purposes.
• Tighter cattle supplies will contribute to higher prices and volatility for cattle and beef in 2026. Smaller cattle supplies paired with strong consumer demand for beef has driven up prices for both cattle and beef. With cattle supplies this tight, markets have become more responsive to news and events that could impact supply and demand. This has resulted in a tremendous amount of volatility in cattle markets.

2025 was a remarkable year for cattle with prices setting records on several occasions. USDA’s most recent net farm income forecast adjusted net farm income downward for 2025 and is projecting lower incomes again in 2026. One of the few bright spots in the agricultural economy has been beef cattle with cash receipts for cattle rising 39% from 2020 through USDA’s forecast for 2026.

The Cattle Inventory

USDA’s January Cattle Inventory report provides state-level and national data on the number and value of cattle and calves, the number of operations, and detailed breakdowns by class. This report sets the tone and direction for cattle markets for the upcoming year. The Jan. 30 report was bullish. All cattle and calves on feed in the United States on Jan. 1, 2026, totaled 86.2 million head, a 75-year low, down about 300,000 head, or 0.3%, from 86.5 million head in 2025. While this is a much smaller decline than the 1.6% average inventory decline from the last five years, it is still an indicator that the U.S. cattle supply is continuing to fall. The continued decline in cattle, though small, means we are now in year 13 of the current cattle cycle and year eight of contraction. Other data contained in the report provides clues about when expansion could begin.