January 31, 2018 / 11:58 PM / 3 months ago

Worsening southern Plains drought slows U.S. cattle herd growth

CHICAGO (Reuters) - Encroaching drought in the U.S. southern Plains contributed to the smallest rise in the nation’s cattle population in three years, analysts said after the government’s semi-annual cattle inventory report on Wednesday.

Insufficient moisture in parts of Texas and Oklahoma, along with areas of persistent dryness in the northern Plains, hurt winter wheat grazing pastures for cattle - forcing more of them into commercial feedyards for fattening earlier than planned.

The bulge in cattle numbers heading to market now could keep a lid on beef and slaughter-ready cattle prices in the months ahead. However, fewer animals next year could later support cattle and beef prices, said analysts.

Wednesday’s U.S. Department of Agriculture twice-yearly cattle inventory report showed the U.S. cattle herd as of Jan. 1 up 0.7 percent from a year earlier at 94.399 million head. That was the smallest increase since a 0.7 percent rise in 2015 versus 2014, said Allendale Inc chief strategist Rich Nelson.

Analysts, on average, had forecast a 1.3 percent rise from 93.705 million in January 2017. Nonetheless, the Jan. 1, 2018 cattle herd is the largest for that period in nine years, said Nelson.

“The report implies we are actively trying to rein in herd growth, and perhaps by the year 2020 we’ll stop with the expansion,” said Nelson.

Dryness was a key issue, but also producers may have been discouraged by how quickly cattle prices fell from 2014, when there were fewer animals because of severe drought in the southern Plains two years earlier, said Nelson.

Derrell Peel, an Oklahoma State University economist, agreed that total cattle numbers continue to grow, but at a slower pace tied to the drought and wheat pasture situation.

“The fact that we put more of them (cattle) into feedlots a little bit earlier means that the actual number of cattle out running around the country is a little bit tighter,” said Peel.

Reporting By Theopolis Waters, Editing by Rosalba O'Brien

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