Cattle Rallies to Record as Beef Supply Shrinks Before Christmas

Cattle futures extended a rally to a record amid shrinking supplies of U.S. beef and increasing demand for the meat as grocers boost purchases before the Christmas holiday.

U.S. commercial beef output in the 10 months through Oct. 31 fell 1.1 percent from the same period in 2011, the government said in a report today. The herd as of July 1 shrank to the smallest since at least 1973. Ranchers culled herds after the worst drought since 1956 eroded crop yields, sending corn, the main ingredient in feed, up as much as 68 percent since mid-June.

Grocers are stocking up on beef, which is often served as part of the Christmas meal, before the Dec. 25 holiday, said Christian Mayer, a market adviser at Northstar Commodity Investments Co. Consumers may pay as much as 6.5 percent more for the meat in 2012, the biggest increase of any food item, the U.S. Department of Agriculture said today.

“The number of cattle is still really tight,” Mayer said in a telephone interview from Minneapolis. “People are buying beef. They need to buy it especially for holiday orders,” he said, referring to grocer purchases.

Cattle futures for February delivery rose 0.8 percent to settle at $1.32725 a pound at 12:13 p.m. on the Chicago Mercantile Exchange. Earlier, the price reached $1.32925, a record for the most-active contract.

Beef Production

Commercial beef production totaled 21.69 billion pounds (9.84 million metric tons) in the first 10 months of 2012, compared to 21.92 billion pounds a year earlier, USDA data show. Beef output will drop 4.2 percent next year, the government has forecast.

Meatpackers processed 387,000 cattle in the first three days of this week, down 1.3 percent from a year earlier, USDA data show. Wholesale beef rose 0.6 percent to $1.9599 a pound as of midday, the highest since Oct. 30, USDA data show.

Feeder-cattle futures for January settlement gained 0.3 percent to close at $1.47875 a pound in Chicago.

Hog futures for February settlement increased 0.3 percent to settle at 87.375 cents a pound.

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