While I have heard discussions around the topic, I have never been one to believe that an “optimal” cow size exists. Every farm is unique and operates in a different production and market environment. Whenever this question comes up, I simply reply that I don’t really care what cows weigh, as long as they are weaning enough pounds of calf each year to be profitable. But even that is a fluid discussion as it is impacted by the market. For example, a cow does not have to wean as large of a calf to be profitable in 2025 as she would have in 2022. The reality is that producers make culling decisions each year based on the best information they have at the time.
While record keeping has never been high on the list of things that cow-calf operations enjoy, it is extremely important and should be used to drive these decisions. Well managed cow-calf operations track weaning weights on individual calves and tie each calf back to its dam. By doing that, productivity can be measured for each individual cow. On the other hand, it is nearly impossible to track production costs on an individual cow basis. Producers with good financial records likely have a solid understanding of what it costs them to maintain the average cow in their herds.
This distinction is important when one considers how to use production records to make culling decisions. Larger cows tend to wean larger calves, but they are also more expensive to own. While it is not easy to observe, they will consume more hay, feed, pasture, and mineral as they maintain their larger bodies and one can make a case that vet / medicine, yardage, transportation and other expenses will be higher for larger cows too. The simple point being that if one is making culling decisions based on calf weaning weights alone, they are likely to be disproportionately culling more of their smaller cows. By doing this over time, the average size of their cows increases, and their costs trend upward.
Several years ago, I put together an Extension presentation aimed at illustrating this point and encouraging producers to consider cow size in their culling decisions. I used a simple budget approach and estimated cost adjustments for various sized cows. I even included a higher cull value on those larger cows, which is relevant to the discussion. Using this approach, it appeared that an operation needed to wean about 50 more lbs of calf for every additional 100 lbs of mature cow they were maintaining.
While I am not suggesting this approach was perfect, I do think it did a good job illustrating the concept. Basing culling decisions solely on weaning weight can be misleading – especially when the herd has cows of varying size. While I don’t think there is an “optimal” sized cow, I know those larger cows must be weaning larger calves to earn their keep. And the only way to do that is to consider calf weaning weights in relation to the weight of the cows.
As we roll through fall, spring-born calves will be weaned and many of those heifer calves will be held for replacement purposes. At the same time, a large number of bred heifers will hit the market and be available for the same purpose. It is not uncommon for someone to comment on how expensive bred heifers are and assume that they can develop their own heifers for much less. While this is true in some cases, I also think it is easy to underestimate some of those costs. The purpose of this article is to briefly highlight three things that are crucial to consider when a cow-calf operator tries to make this comparison. And I would argue these are even more significant given the strength of the current cattle market.
The opportunity cost is the biggest cost
I hope this one is obvious, but the largest cost of developing a heifer is the opportunity cost of that heifer at weaning. High quality weaned heifers, in the 500-600 lb range, are bringing $2,000 and higher across most US markets. Whatever those heifer calves are worth in the marketplace is the first cost of heifer development. By not selling that heifer calf, one is forgoing that income. This cost is huge right now due to the strength of the calf market and higher interest rates, which makes forgoing that income even more significant. While the heifer herself is the easiest opportunity cost to quantify, this applies to all the costs of developing her (feed, pasture, breeding, facilities, labor, etc.).
They won’t all make the cut
After the initial cost of not selling the heifer at weaning, another year of expenses will be incurred to get that heifer to the same stage as those bred heifers on the marketplace. She will be carried through a full winter and summer grazing season and be bred to calve the following year. There are significant costs in doing this, but it is also important to understand that not all those heifers are going to end up being kept for breeding. Some will fail to breed, and others will simply not meet the expectations of the farmer. Heifers not kept for breeding will end up being sold as feeders and likely won’t cover all those expenses. The “loss” on these heifers becomes an additional cost of the heifers that do enter the cow herd as replacements.
Next year’s calf should be very profitable
This is another one that doesn’t get much attention but really matters in a time like the present. It’s easier to think about this one applied to a specific timeline so I will frame it for a heifer born this spring. A heifer calf weaned in the fall 2025, kept for replacement purposes and bred in 2026, won’t wean her first calf until fall of 2027. Conversely, those bred heifers on the market in fall of 2025 should wean their first calf in 2026. While nothing is guaranteed in the cattle markets, fundamentals suggest that 2026 should be a profitable year for cow-calf operations. The potential profit on that calf in 2026 becomes capitalized in the value of those bred heifers in 2025. For this reason, comparing the cost of a bred heifer in fall 2025 to the cost of developing a heifer weaned in fall of 2025, can be misleading.
The purpose of this article was not to suggest that either replacement strategy was best. There is merit in both approaches, and it largely comes down to the goals of the operator. While I am an economist, I also recognize there are a lot of non-economic considerations that come into play. But the economics of the decision is complex, and carefully thinking through all aspects of the decision is likely time well spent.
Much has been written recently about the strength of the current cattle market. With beef cow inventory at a 60+ year low and demand being very strong, cow-calf operations are clearly in the driver’s seat. Calf values are more than double what they were three years ago, which speaks to considerable opportunity for cow-calf operators to invest in their cowherds. Expansion is often the first opportunity that comes to mind in a strong calf market, and there is likely merit in expansion, if doing so is consistent with the goals of the operation. However, some producers may not be interested in growing the size of their cowherds due to land constraints, management limitations, or other reasons. The following are a few other investment opportunities worth consideration.
Genetics – Some producers may choose to use the current increase in cow-calf revenues to improve the genetics of their herds. Investment in genetics often has long-run implications, resulting in more valuable calves to sell over multiple years. Sires certainly come to mind, but the current calf market combined with the strong cull cow prices may provide an opportunity to cull a bit harder and also purchase some higher quality females.
Facilities – Working facilities are crucial resources for cow-calf operations for numerous reasons. Value-added opportunities such as health protocols, post-weaning programs, castration, implants, etc. are made much easier with quality working facilities. The same is true for receiving, sorting and loading of cattle. If facilities have historically been a constraint, the current market may be providing an opportunity to make improvements and position the operation to sell higher value calves in the future.
Grazing systems – Winter feeding days are typically the most expensive days for cow-calf operations as stored feed (hay) is being fed. Improved grazing systems (interior fencing, additional water sources, portable mineral feeders, etc.) allow for more efficient use of existing forage during the grazing season. This has the potential to increase the number of grazing days and reduce the number of hay feeding days. In most cases, this results in lower costs per cow per year and puts an operation in a better position when calf prices fall.
Debt service / financial management – Strong markets also provide an opportunity to make financial moves that set an operation up for the long run. Increased revenues may allow an operation to pay down some debt and thereby lower their cost structure going forward. Similarly, it may provide an opportunity to build some working capital and lower dependence on operating loans. In both cases, future interest expenses are reduced, which has implications for profitability.
To be clear, the purpose of this article was not to discourage expansion. There are likely operations that need to do just that. But I also live in an area where land constraints are real and know that expansion is not always feasible. Plus, I have seen situations where operations expanded during strong markets and wished they had not done so a few years later. The main point is that the current calf market provides a significant opportunity for a cow-calf operation to position itself for the long-run, and that will look different for each one of them.
USDA released its Cattle on Feed and July Cattle inventory reports on Friday, July 25th. These reports are a good opportunity to poll some thoughts from our SAT authors across the South.
Will Secor – University of Georgia
The July Cattle and Cattle on Feed reports from USDA provided indications that the cattle herd is approaching a low in inventory but may not be there just yet. The mid-year Cattle report provided a first estimate of the 2025 calf crop, which is projected to be roughly 1.3 percent smaller than the 2024 calf crop. Combined with January’s report of fewer beef cow replacement heifers, this is an indication that the cattle herd may still be smaller come January 2026. However, the Cattle on Feed report indicates that the share of cattle on feed that are heifers declined again year-over-year to its lowest July reading since 2019. Overall, these reports show a continued decline in the cattle inventory, but they also shed some light on the potential of a rebuild that may be starting soon.
Kenny Burdine – University of Kentucky
The fact that there was no mid-year inventory report in 2024 makes comparison a bit difficult. Beef cow inventory was down by 1.2% from July of 2023. Most were expecting beef cow inventory to be down a bit more over the last two years, but I think this speaks to how much lower beef cow slaughter has been running. For the 12 months from July 2024 to June 2025, nearly 650,000 fewer beef cows were harvested than from July 2023 to June 2024. I think it’s likely that beef cow inventory was down by more than that from July 2023 to July 2024, but increased over the last 12 months due to lower slaughter levels. Heifers held for beef cow replacement were down 3% from 2023, which is a decrease of 100,00 head. The best way to think about this number is to consider it as a percentage of beef cow inventory. When looking at it that way, our heifer retention pace is lower than it was in 2023.
The surprise of this quarterly cattle-on-feed report was June placements, which were down 8% from 2024 and outside the range of expectations. Marketings continue to suggest we may be pulling cattle ahead, but placements suggest we are not replenishing them at the same pace.
Heifers, as a percentage of on-feed inventory, came in at 38.1%. This is about a percent and a half lower than July 1 of 2024, but up about half a percent from April of this year. Much like the beef replacement heifer estimate from the inventory report, this does not suggest much retention is occurring. Any growth in beef cow numbers is coming from reduced cow slaughter.
Shifting my focus towards home, I don’t think much retention is occurring in Kentucky at present. Anecdotally, producers tell me they are not keeping heifers at these price levels. I also think interest rates are impacting this decision. I do expect some expansion to occur in the Commonwealth over the next few years, but we are limited by land constraints and land costs.
Andrew Griffith – University of Tennessee
I don’t really know what to say about these reports. A lot of the time we discuss industry estimates compared to USDA estimates. The main thing in this report is we saw lower beef cow numbers, a smaller calf crop, and fewer cattle on feed.
It looks like more heifers are being retained this year and fewer cows are being slaughtered. There is a good chance we see a steady to slightly higher beef cow number come January 1, 2026. Of course, drought could hit once again and further delay rebuilding.
The one thing I feel certain is that the competition for cattle is going to be fierce the next couple of years. I think we will see closures, idling, or consolidation of packing plants and feedlots. Even if that does not happen, capacity utilization is going to be small. This also feeds back to stocker and backgrounders who will be growing a smaller number of cattle than usual, which will influence profitability.
Josh Maples – Mississippi State University
I don’t see significant signs of expansion from these reports. Heifers held for beef cow replacement were down 3% from the 2023 report. The 5% drop in heifers placed into feedlots during the last quarter is the number that jumps out as the question mark. But, taken with all of the other data, I’m not yet ready to call it an obvious sign of expansion. After accounting for fewer imports from Mexico, heifer placement is down 2.5% during the first half of 2025 compared to the first half of 2024. It could just be that we have fewer heifers due to smaller calf crops, and that there are some differences in placement timing. The overall percentage of heifers on feed ticked back up to 38% after dropping in the previous quarter. I think 2025 is likely a stabilization year for beef cow inventory, with 2026 having the higher odds for modest expansion if pasture conditions cooperate.
Hannah Baker – University of Florida
While the 2025 July Inventory Report does not include state breakdowns, the numbers reported in both the inventory and cattle on feed reports reflect what is happening across Florida: some producers are thinking of and starting to retain heifers, but the majority are still capitalizing on record-high calf prices. Beef replacement heifers are down 3 percent from 2023, and the beef cow herd is smaller by 350,000 head. The number of “other heifers over 500 pounds” is also 3 percent lower than 2023, meaning there is also a smaller pool of heifers to pull from for any impulse breeding in the back half of 2025 and early 2026. Signs of slow heifer retention are also shown in the Cattle on Feed report, where the number of heifers on feed was 5% lower than 2024, but the percentage of heifers on feed rose by 0.5% since April to 38.1%.
James Mitchell – University of Arkansas
A statistic I like to track is the ratio of July beef replacement heifers relative to the previous year’s calf crop (as estimated in the January report). I use this as a crude indicator of retention and potential herd expansion. The estimate for July 2025 is 11.04%, nearly identical to July 2023 at 11.03%. For comparison, the ratio was 14.32% in July 2015. We’re not there yet, which makes me wonder: with strong profitability over the last few years, are producers reinvesting in other ways – farm infrastructure, equipment, land?
Charley Martinez – University of Tennessee
It’s unfortunate that we didn’t have last year’s July 1 report. But, when looking at the percentage of changes between 2023 and 2025, I think the trends were expected. The most interesting statistic to me was the expected 2025 calf crop of 33.1 million head. The calf crop was 33.56 million in 2023, and 33.52 million in 2024. The calf crop expectation highlights the impacts of the shrinking herd over the last two years, and the expected tighter feeder calf supply signals continued elevated feeder calf prices. This report also starts the excitement for the January 1 report, where we will have statistics and more detailed data.
While it is hard to dispute the overall strength of the recent cattle market, it is also important to note that during the last 26 months there have been multiple times when markets saw significant downward swings. The most recent of these occurred since the end of January and was likely sparked by the resumption of live cattle imports from Mexico, continued talk of trade disruptions, Avian Influenza, and any number of other factors. The market also fell by more than $40 per cwt from September to December 2023 and more than $30 per cwt from late May to early September 2024. For producers who sold cattle during those pullbacks, the impact on returns was significant.
There are a lot of potential strategies to manage price risk, and the simplest one may be a forward contract. By forward contracting cattle, price risk is largely eliminated as the seller and buyer agree on a purchase price prior to delivery of the cattle. A similar strategy would be selling cattle through an internet auction and specifying delivery at a later time. In both cases, the seller entering the forward contract still has production risk as they must meet the specifications of the contract (weight, quality, etc.), but market swings are no longer a concern.
Finally, I have talked more about Livestock Risk Protection (LRP) insurance than any other risk management strategy recently. It works almost exactly like a put option but is much simpler and has the advantage of flexibility on scale. Unlike several other price risk management tools, LRP insurance can be purchased on any number of head, which is much easier for smaller operations to utilize. LRP has been made more attractive over the last several years through increased premium subsidies and allowing producers to pay premiums after the ending date of the policy.
The specific tool or strategy that cattle producers utilize to manage price risk is less important than their overall risk management plan. I encourage producers to know what risk management tools are available to them, understand how changes in sale price impact their profits, and plan to cover themselves from downside price risk. I still feel good about the fundamentals of the cattle market, but I think the first couple weeks of February have been a good reminder that price risk always exists, even in a bull market!
