Growing Beef Newsletter
June 2025, Volume 15, Issue 12
Herd Expansion in a WILD Market
Patrick Wall, ISU Extension and Outreach beef specialist
There is no doubt that the steady surge in the beef cattle market feels a bit different than those in the past. For perspective, just 5 years ago, producers were receiving less than $1 per pound for fed cattle; the trendline is almost a perfect 45-degree angle upward since 2020! However, for every time I have been asked, “Should/how do I expand?”, I’ve been asked, “When is it going to crash?” at least ten times. The apprehension to expand at these price levels is certainly warranted given the risk. However, there are opportunities to capture additional profits in this market while protecting your investment.
What’s different?
I think it is important to understand the changes the beef industry has undergone since the last market peak in 2014. In my opinion, they are all contributing factors to the current strength in the markets, particularly feeder cattle.
#1 - Livestock Risk Protection Insurance (LRP). Though the program was launched in 2003, it was dramatically expanded in 2019 and 2020. Basically, the subsidies were increased, the scope was broadened, and the premium cost was moved to the end of the endorsement period, making it a MUCH more attractive insurance program for the cattle industry. Why is it important for this article? It can be used to protect breeding females as well. Not only heifers you potentially intend to breed, but yet-to-be-born calves for your upcoming calf crop can be insured as well! Risk protection for the cow-calf sector is certainly…different.
#2 – Interest Rates. In 2014, the prime interest rate was 3.25% for the entire year. Heifer calves and bred females looked like a sound investment to both lenders and producers, many of them young, energetic upstarts in the cattle business. More importantly, there was little risk protection on the loan (see #1). Maybe most importantly, the young producers who got burned after the last market spike are likely no longer looking at beef production as a career path or business venture. In 2024, the prime rate was 8.0%, settling back to the 7.5% where it sits today. As you might imagine, lenders are much more reluctant to secure funds for a producer where cows are the only collateral.
#3 – The Aging Producer. This is the factor that no one seems to want to discuss. The average age of Iowa farmers in 2024 was 57.6 years old, and trending upward (older). For the large group of producers who are 65+, their land, equipment, and cows are largely paid in full. While they are certainly entitled to enjoy the fruits of their labor, their back and their physician are likely telling them that expansion is a bad idea. In the same breath, selling out is not an option because capital gains tax will diminish the value of the 40+ years of sweat off their brow. The average price for Iowa farmland in 1985 was $1,064 per acre. Today, that value sits at $11,467. No doubt permanent pasture acres would be cheaper, but the trendline over time is very similar. All said, the aging producer is challenged to get out, and the young producer has a virtually impossible task of getting in. The number of heirs willing to take the reins of the cattle enterprise is far smaller than the industry needs. Even when the next generation is ready and willing, the discussion alone regarding how to transfer livestock assets is dang difficult.
So where are the opportunities?
Iowa had a really good hay crop in 2024, followed by a fairly mild winter into 2025. As a result, producers can leverage carry-over hay into a group of keeper heifers or purchase surplus hay from 2024 at a reasonable price. Just last week (May 20), average quality grass alfalfa mixed hay was bringing $70.00 per ton at auction. Local online reports indicate pockets in Iowa where it can be purchased in volume even cheaper than that.
As mentioned above, buy insurance. Though our export markets remain strong and our domestic demand is good, protecting your livestock operation at this price point is always wise. The global market seems volatile with every news cycle, but the consumer keeps indicating that they are willing to slap down their debit card for beef that satisfies their palate.
There’s also room for some creativity. In March of 2013, corn was $7.00…right before it was less than $4.00 the following November of 2014. As a result, some optimism in the grain market still lingered as cattle prices soared briefly. Today, 5-weight feeder cattle are $4.00 a pound, and corn is $4.50 per bushel. The incentive to get creative growing forage crops on marginal acres has never been greater! Since most all the crops are already in the ground, maybe the only creativity necessary is to realize that corn silage is worth about $0.0225 per pound. Custom silage choppers are busy, so if this is part of your feed plan for expanding, get on the schedule NOW.
Recent cattle on feed reports are not indicating that massive expansion of the U.S. cow herd is underway. Like usual, it needs to rain in some areas largely known for cow-calf production. The southern border being closed to Mexican imports may also be masking what’s actually happening in the countryside. Nevertheless, the October 2026 fed cattle contract is still $1.97. There’s definitely still optimism in the market.
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