Shrinking U.S. Cattle Herd Means No Relief for Soaring Beef Prices




Michael Hirtzer and Dominic Carey
Mon, January 31, 2022

(Bloomberg) -- Drought is shrinking the American cattle herd, meaning consumers are unlikely to get relief from near-record beef prices anytime soon.

Abnormally dry conditions last year in the northern U.S. Plains squeezed supplies of hay and feed for cattle, prompting some ranchers to sell to slaughterhouses animals usually held for breeding. Now, deepening drought in the southern part of the Plains -- where most cattle in the U.S. are raised -- could force another round of herd reductions later this year.

“Drought is looming large,” Derrell Peel, extension livestock marketing specialist at Oklahoma State University, said in a phone interview.

The U.S. Department of Agriculture in its biannual cattle inventory report Monday said the herd was 2% smaller than a year ago. It’s the third straight yearly drop and the smallest herd since 2016. Analysts surveyed by Bloomberg expected only a 1.1% decline.

“The cycle we are in right now is a liquidation phase,” Peel said.

Meat prices have been surging ever since the Covid-19 outbreak sickened workers at slaughterhouses, forcing shutdowns that slowed the amount of food moving into the supply chain. Meanwhile, demand stayed strong even at the higher prices. The smaller cattle supplies may raise costs for meatpackers and potentially consumers as well.

“I don’t really expect beef prices to decline very much,” Peel said.

(Adds USDA data in fourth paragraph)