June 16 (Bloomberg) -- Cattle futures rose to their highest in at least 22 years as the surging cost of corn renewed concern that U.S. feedlots will reduce the number of animals available for beef production. Hogs fell.

Corn, the main ingredient in cattle feed, jumped to a record for an eighth straight session as floods damaged fields in the Midwest. Feedlots lost $50 to $100 a head last week, said Bob Wilson at hedgersedge.com. Cattle futures are up 18 percent since March 31, partly on speculation feedlot owners will be forced to sell more animals at lighter weights.

``An adjustment will have to be made to the structure of the industry,'' said David Kruse, a commodity trading adviser with Commstock Investments Inc. in Royal, Iowa. ``I find it hard to believe there will not be dramatic cutbacks in production.''

Tighter cattle supplies and improved demand sent wholesale beef prices up 15 percent since April 4, contributing to U.S. food inflation that the government says may jump 5.5 percent this year, the most since 1989. Beef producers including Tyson Foods Inc. and National Beef Packing Co. have cut output because of rising cattle costs.

Cattle for August delivery rose 1.175 cents, or 1.2 percent, to $1.0345 a pound on the Chicago Mercantile Exchange, after earlier reaching $1.03875, the highest for a most-active contract since at least 1986, according to Bloomberg data.

Kruse said cattle futures may reach $1.20 a pound next year as corn remains near record highs on the Chicago Board of Trade.

Beef Rally

The price rallied this year on increased seasonal demand for U.S. beef by domestic consumers and increased exports. Wholesale beef rose 15 percent from a two-year low on April 4, reaching $1.5705 a pound today, data from the U.S. Department of Agriculture show. Cattle gained 14 percent in the past year.

Corn prices, which have risen 82 percent in the past year, already helped reduce cattle inventories. As of May 1, feedlots held 11.1 million head, down 1.4 percent from a year earlier, the government said. Ranchers last year cut the number of young females they held by 3.5 percent to 5.67 million on Jan. 1, the second straight annual decline.

As the incentive for producers dwindles, demand for U.S. beef exports will jump 15 percent next year, the USDA said. Sales will increase because of a declining dollar, rising global incomes and a relaxation of bans imposed after a case of mad cow disease in 2003, the USDA said.

Export Demand

U.S. beef exports in the first four months of this year rose 19 percent from a year earlier, data from the USDA show. The possible unraveling of an agreement to resume U.S. beef exports to South Korea is not enough to offset rising demand in China, Russia and countries including Vietnam, where purchases have increased more than eightfold, Kruse said.

Global demand for beef, pork and chicken may grow as much as 50 percent by 2020 as the population increases and incomes improve, a study by Rural Industries Research and Development Corp. said in December.

In another livestock market, feeder cattle futures for August delivery rose 0.5 cent, or 0.5 percent, to $1.0965 a pound in Chicago. The price of young cattle that have been grazing on pastures before they are sold to feedlot operators is up 2.4 percent this year.

Higher corn prices normally drive down the cost of feeder cattle because meatpackers including Tyson Foods, the largest U.S. meat company, will wait for a better price, said Lane Broadbent, an analyst at KIS Futures Trading in Oklahoma City.

The recent rally may have the opposite effect on prices because ranchers are now holding their cattle off corn longer, feeding them on grass and creating a short-term shortage on feedlots, Broadbent said.

``There aren't as many guys taking cattle to town, and that's driving up the price of what's left,'' he said.

Hog futures for August settlement fell 0.175 cent, or 0.2 percent, to 74.975 cents a pound in Chicago. The price has risen 30 percent this year on surging exports and rising consumer demand for pork, which is generally cheaper than beef.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net.

Last Updated: June 16, 2008 16:03 EDT