Key Takeaways:

• A years-long drought decimated breeding stock, leaving the domestic cattle supply at generational lows with no quick path to recovery.
• Unlike ranchers who benefit from premium beef prices, packers absorb the cost of scarce livestock without controlling what consumers pay at the counter.
• Counterintuitively, today's dire conditions may signal opportunity — as capacity exits, margins normalize, and financially resilient processors trade near what may prove to be a cyclical bottom.

In a market where nearly every natural-resource sector is enjoying fat margins, U.S. beef packers stand out for the hopelessness of their operating environment. To us on the Global Resources Team at VanEck, that is precisely what makes them worth a hard look.

For U.S. beef packers, conditions look bleak. At the beginning of the year, the USDA counted about 86.2M head of cattle, which is the seventh consecutive annual decline and the smallest figure since 1951. Many are dairy cows and are not even reared for beef. The number of beef-cows is 27.6M, the lowest since 1961.

Then there is New World screwworm, a flesh-eating parasite that was eradicated from the U.S. in 1966 which resurfaced again this month, with cases clustering around South Texas and New Mexico. It is the reason the southern border has been shut to Mexican cattle imports, which normally supply 1.2M to 1.5M head a year. In 2025, only 0.2M crossed over. We think screwworm is ultimately controllable; the sterile-fly eradication playbook worked once and can work again, though ramping fly production could take several months.

U.S. Cattle Inventory on the Decline

Source: USDA. Data as of June 2026. For illustrative purposes only.

No Grass for Grass-Fed Cattle

How we got here is mostly a story about drought. Successive dry years across the Southern Plains scorched pasture and forced ranchers to cull the breeding cows they would otherwise have kept, accelerating a liquidation that pushed the herd well past a normal cyclical low.

Unlike, say, a chicken that takes about seven weeks to reach slaughter weight, a calf takes roughly 18 to 24 months. And when cattle are scarce and cattle prices are high, ranchers do the rational thing and hold animals back a little longer to add weight before selling, which perversely tightens near-term supply even further. We saw this in the data with cattle live weights setting records throughout 2025 and into 2026.

Spotlight on the Southern Plains:

Source: DroughtMonitor. As of June 2026. For illustrative purposes only.

Record-setting U.S. Cattle Weight

Source: USDA. As of March 31, 2026. For illustrative purposes only.

Economics 101

The crux is in the margin. Beef packer economics reduce to the “cutout-to-live” spread, which is the difference between the price of a beef “cutout” and the price paid for live cattle. Record beef prices have not helped as much as one may think. In the U.S., beef packers are not vertically integrated and this point gets muddled in the financial press. High cattle prices are the packer's poison, not its windfall.

It is the ranchers and the cattle feeders who are the ones seeing excellent returns and cashing in. The beef packer is the squeezed middle, buying dear and selling into a retail market it does not control. When cattle are scarce, packers compete fiercely for a shrinking pool of fed animals and that spread collapses. Companies like Tyson Foods and JBS have braced investors for another difficult year for their beef segments. The cash generated from beef sales is not enough to justify the all-in cost to simply run a beef plant (labor, facilities, fabrication, etc.). The math does not work.

In Focus: Tyson Foods Adjusted Operating Income

Source: Tyson Foods. Data as of March 31, 2026. For illustrative purposes only.

Too Many Plants, Too Few Cattle

For the first time in a decade, January's USDA cattle inventory numbers showed a small uptick in heifers (females that have not yet given birth), which is a tentative sign that ranchers are contemplating herd expansion. But every heifer held back to breed is a heifer pulled out of the slaughter pipeline, so this first phase of a rebuild makes beef scarcer, not more plentiful. We don't expect genuine herd growth to show up before 2028.

That said, U.S. beef packers are not waiting around and have begun rationalizing capacity. Tyson Foods plans to close its Lexington, NE plant, which is a relatively large one that slaughters about 4,500 head a day, and reduce its Amarillo, TX facility to a single shift, pulling industry capacity down. JBS is following Tyson out the door. Earlier this week, it announced that it would close its Souderton, PA, plant (roughly 2,000 head per day), along with a beef value-added operation in Memphis, TN. Too many plants competing for too few cattle hurts margins, and taking capacity offline is a fix that also guards against a drawn-out slump during the next leg of the cycle.

These are sound, diversified companies, not pure-play beef producers. Chicken, pork, and value-added products (e.g., Dino Nuggets, a favorite in our home) are each generating cash while beef suffers. As capacity tightens and the herd eventually rebuilds, the cutout-to-live spread recovers, and with four meat producers controlling around 85% of processing, pricing discipline returns quickly once the overhang clears. Add in the eventual reopening of Mexican cattle flows, which we expect to happen this year, combined with a contained screwworm, and throughput recovers on top of margin.

This is not a bet on high beef prices. It is a bet on margin normalization and capacity rationalization at financially resilient operators trading near cyclical lows, while the market appears to price trough losses as permanent. Beneath it all is a simple, enduring fact: people have to eat.

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