The U.S. cattle herd probably shrunk to the smallest size since 1958, and the drop in beef supplies may boost prices to a record, analysts said.
Ranchers held 92.211 million head of cattle as of Jan. 1, down 1.6 percent from a year ago, according to the average estimate of seven analysts surveyed by Bloomberg News. That would be the smallest herd in 53 years, said Ron Plain, a livestock economist at the University of Missouri in Columbia. The government releases its semiannual report on the cattle herd at 3 p.m. today in Washington.
“Cattle producers are being squeezed by tough finances and a soft economy,” Plain said. “The supply is just shrinking. Beef prices are likely to be record high in 2011, and it should be a record that will last.”
Wholesale choice beef has jumped 23 percent in the past year to $1.731 a pound, and costlier meat may spur restaurants and grocery stores to pass along costs to consumers. The highest price was $2.0118 on Oct. 16, 2003, according to Bloomberg data from the government dating back to 2001. Shoppers may pay as much as 3.5 percent more for beef this year, the government has forecast.
McDonald’s Corp. said this week that the company’s U.S. commodity costs may rise as much as 2.5 percent this year, including a “substantial increase” in beef. Earlier this month, Texas Roadhouse Inc. said it plans to boost menu prices.
Cattle ranchers in the southern Plains made an estimated $52 per cow 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.
“It’s a multiyear process,” Robb said in a telephone interview from Denver. “Just one year’s return in the cattle business does not necessarily lay the foundation to increase the number of breeding animals.”
Calves have nine-month gestation periods and take 20 months to reach slaughter weight, according to Plain of the University of Missouri.
U.S. beef production may be 26 billion pounds (11.8 million metric tons) this year and drop to 25.2 billion pounds in 2012, Robb said. Both would be the smallest since 2005, he said.
The U.S. Department of Agriculture forecasts output at 25.66 billion pounds this year. Consumer beef prices will be the highest ever this year and probably will climb further in 2012, Robb said.
Surging prices for corn, the main ingredient in cattle feed, discouraged livestock producers from expanding. The grain has jumped 82 percent in the past year.
Retail prices for ground beef were 8.8 percent more expensive in December than a year ago, government data show. The cost of meat this year will rise faster than total food inflation, the USDA projects.
Cattle futures for April delivery fell 0.1 cent to $1.12175 a pound yesterday on the Chicago Mercantile Exchange. The price has climbed 26 percent in the past year.
On Jan. 18, the commodity reached $1.166, the highest for a most-active contract since futures began trading in 1964.