U.S. Cattle Industry Will Expand as Drought Eases, Rabobank Says

Lower feed costs, record meat prices and an easing drought point to expansion in the U.S. cattle industry, even as the pace may be restrained by reduced grazing land and high entry costs for new producers, Rabobank International said.

The U.S. cattle herd as of Jan. 1 grew 1.4 percent from the prior year to 89.8 million head, marking the first increase in herd size since 2007, the U.S. Department of Agriculture said on Friday. The numbers reflect a “more aggressive rebuilding curve” than expected, said Don Close, Rabobank International’s vice president of food and agribusiness research for animal protein in St. Louis.

“With the market signals that have been out there and the recovery to pasture conditions that we’ve seen in so many areas, I think it’s very likely that we’ll see a short-term spike in growth,” Close said in a telephone interview on Friday, before today’s release of a Rabobank beef report. “Weather’s going to return to be a factor somewhere and market conditions are going to change. Once we get into year three, four, five, this could be a much slower growth curve.”

Beef production is forecast to fall 1.7 percent this year to a 22-year low, as producers hold back females for breeding to expand herds, the USDA estimates. Fed-cattle steer cash prices will average $1.50 to $1.70 a pound this year, Close said. That compares with last year’s average of $1.5456 a pound, according to the USDA. Feeder-cattle steer prices will average from $2.15 to $2.30, Close said.

The amount of U.S. grazing land has fallen 6.3 percent in the past decade, according to Close’s report.

Demand for beef is expected to continue to be “extremely good” this year, even amid record prices, he said.

“The benefits for consumers with the reduction in gasoline prices provides the opportunity to spend more at the grocery store,” Close said. “We see a very solid base for all animal proteins into the future.”

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