U.S. Cattle Herd Drops 1.4% to Lowest Since 1958 After Beef Prices Surge

The U.S. cattle herd shrank to the smallest size in 53 years as of Jan. 1, as feed costs climbed and beef producers slaughtered more animals to take advantage of higher prices.

The herd, including beef and dairy animals, totaled 92.582 million head as the year began, down 1.4 percent from a year earlier, the U.S. Department of Agriculture said today in a semiannual report. That’s the smallest since 1958, the USDA said. Seven analysts in a Bloomberg News survey were expecting a 1.6 percent reduction, on average.

“We slaughtered a lot of cows and heifers in 2010, even though the outlook was quite good for saving them and breeding them,” Ron Plain, a livestock economist at the University of Missouri in Columbia, said before the report. “A lot of the cow/calf producers just needed cash now.”

Ranchers in the southern Great Plains made an estimated $52 per cow sold last year, following losses of about $32 in 2009, said Jim Robb, the director of the Livestock Marketing Information Center, a researcher funded by the industry and government. Producers aren’t ready to expand because most of the profit wasn’t made until the fourth quarter, he said.

Rising Futures

Cattle futures climbed 26 percent in the past year, reaching a record $1.166 a pound on Jan. 18. Still, surging prices for corn, the main ingredient in livestock feed, discouraged expansion. The grain has jumped 78 percent in the past year.

“One of our biggest concerns as we look ahead are these increasing costs and how that potentially influences the size of the U.S. livestock industry,” Robb said before the report. “The largest cost input across the livestock industry is the feedstuffs.”

The number of young, female beef cattle held for breeding fell to 5.158 million, down 5.4 percent from 5.451 million a year earlier, the USDA said. Analysts expected a 2.1 percent drop.

Steers for immediate delivery averaged $1.0431 a pound in the first four days of this week, up 25 percent from the same period a year ago, according to USDA data. Before today, wholesale beef prices rose 23 percent in the past 12 months.

‘Little Incentive’

“There’s just very little incentive to hold back heifers and begin to build herds,” John Nalivka, the president of meat-consultant Sterling Marketing Inc. in Vale, Oregon, said before the report. “Prices are high, and that caused a lot of beef cows to go to slaughter.”

The inventory of heifers for milk-cow replacement totaled 4.557 million on Jan. 1, up 0.7 percent from 4.526 million a year earlier, the USDA said. The average analyst estimate was for a 0.6 percent decline.

The number of calves born during 2010 was estimated at 35.685 million, down 0.7 percent from a year earlier and the fewest since 1950, according to the USDA.

Cattle futures for April delivery rose 0.6 cent, or 0.5 percent, to settle at $1.12775 on the Chicago Mercantile Exchange. Feeder-cattle futures for March settlement gained 0.625 cent, or 0.5 percent, to $1.26225.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

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