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US Beef Herd Shrinks; Will Bring Higher Beef Prices

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The US beef cow herd shrank to its lowest level in seven years, signaling continued high beef prices for consumers and restaurants well into 2022.

The beef cutout price, as the USDA composite beef price is called, is currently up 20% from a year ago, while April live cattle futures hit new contract highs this week. High meat prices are one of the main factors driving US food inflation, which is up 27% year over year, according to Gro's US Food Price Index. The daily-updating index reflects prices based on consumption of a wide range of food items.

The beef cow herd totaled 30.1 million head as of Jan. 1, down 2% from a year earlier. That represents the largest contraction since 2014, when the US herd size shrank in the wake of 2012’s severe drought. All cattle and calves in the latest period totaled 91.9 million head, also down 2% from a year ago. Inventory numbers are released twice a year. 

Declining beef cow numbers come as ranchers are reluctant to expand their herds due to high feed costs — corn, for example, is up 40% from a year ago to about $6 a bushel. Ranchers also moved more cattle into feedlots late last year as drought conditions reduced the amount of pasture for hay and grazing in the western United States and on the Plains, as Gro wrote about in the fall. 

Soaring feed costs are squeezing profit margins for cattle ranchers.

Also contributing to currently high beef prices have been labor shortages at processing plants. 

Herd size reductions generally track summer and fall drought severity readings on the Gro Drought Index. Colorado, South Dakota, and Nebraska — the hardest hit among the cattle states — saw beef cow declines in the latest period of 19%, 11%, and 6%, respectively.  

The continuing drought in the southern Plains could force another round of herd reductions later this year. US cattle are primarily raised in Texas, Nebraska, and Kansas. 

-Related Insights: 

A Look at Rising Food Inflation

US Beef Export Pace Will Depend on China

US Beef Prices to Drop, Gro Expects


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