Canada beef cow herd forecast to hit 9-year low

* Cow herd to fall to roughly 4.5 mln head

* Beef prices pressured by recession, pork glut

* Canada beef exports to drop sharply

By Rod Nickel

WINNIPEG, Manitoba, Aug 12 (Reuters) - Canada's beef cow herd will shrink by 2010 to its smallest size in nine years, the Canadian Cattlemen's Association said on Wednesday, as farmers cash out of an industry reeling from drought and recession.

Canada's cattle industry has seen demand from the United States for live animals drop with the country of origin labeling law, while drought in Western Canada has made feeding cattle expensive.

The recession and a glut of cheap pork on the market have further battered beef prices this year.

Aggressive culling of the herd should prepare the industry for better prices next year, once global economic conditions improve and pork levels return to normal, said Andrea Brocklebank, research manager of Canfax, a division of the Canadian Cattlemen's Association.

"To be honest, (fewer cows) is a positive thing because ... put decreased supply and higher demand together you should see price support," she said in an interview.

Cattle prices are flat or slightly higher from a year ago, but they face pressure in fall as money-losing feedlots pay less, Brocklebank said. Prices should improve in 2010 as the industry feels the impact of a smaller herd, she said.

Cattle production isn't expected to increase until late 2011 or 2012 at the earliest.

Cow numbers may fall faster than the 2 to 3 percent drop Canfax is forecasting by 2010 if winter feed isn't readily available this fall, Brocklebank said. Canfax would not give a projected size of the beef cow herd next year, but a 2.5 percent drop from Jan. 1 would leave it around 4.5 million head.

The number of beef cows is indicative of future production capacity of feeder and fed cattle, which supply the beef industry.

August live cattle futures 2LCQ9 on the Chicago Mercantile Exchange ended up 1.125 U.S. cents at 84.425 U.S. cents per pound on Wednesday.

The recession has hit beef prices hard as consumers stop dining out, Brocklebank said. The prices of middle meats, which include valuable ribs and loins, are weakening, but demand for cuts used for hamburger is growing.

The only rising beef prices are of retail cuts, which represent store-bought beef as consumers cook at home.

The shrinking cattle herd is offset by sharp projected drops in exports of fed cattle (23 percent) and feeders (48 percent). The United States is Canada's biggest beef export market.

The beef-processing industry, led by Cargill [CARG.UL] and XL Foods in Canada, as well as feedlots will have to compete aggressively for cattle next year with fewer animals, which should support prices, Brocklebank said. (Editing by Marguerita Choy)