U.S. cow herd drops to seven-year low, beef prices set to rise further

CHICAGO, Jan 31 (Reuters) - The United States has the fewest beef cows in seven years, the U.S. Department of Agriculture said on Monday, signaling that high meat prices will continue to rise.

Ranchers increasingly sent cows to slaughter last year, rather than keeping them to reproduce, as dry weather reduced the amount of pasture for grazing in the western United States and on the Plains.

Labor shortages and workers’ fears about COVID-19 also limited slaughtering at processing plants run by companies such as Tyson Foods Inc and JBS USA, the North American arm of Brazilian meatpacker JBS SA.

The beef cow herd totaled 30.1 million head as of Jan. 1, down 2% from a year earlier and the lowest since 2015. All cattle and calves totaled 91.9 million head, also down 2% from a year ago.

“We’re going to have less beef in the pipeline,” said Altin Kalo, agricultural economist for Steiner Consulting.

President Joe Biden’s administration, concerned about price hikes in general and especially in the meat sector, said this month it would spend $1 billion and issue new rules to address a lack of “meaningful competition” in meat processing.

The U.S. Labor Department said in early January that inflation was at a nearly 40-year high.

Rising beef prices normally induce cattle producers to expand their herds, Kalo said.

“That signal should have gone to the producer this year,” Kalo said. “They didn’t receive it because there were bottlenecks that didn’t allow plants to process more than a certain number of cattle.”

Beef supplies will likely tighten in the second half of 2022, after a temporary bump in production due to ranchers sending more heifers to slaughter instead of retaining them for breeding, said Rich Nelson, chief strategist for brokerage Allendale. “After this summer, it’s going to tighten,” he said. (Reporting by Tom Polansek in Chicago Editing by Matthew Lewis)