By Julie Ingwersen and Heather Schlitz
CHICAGO (Reuters) – The return of drought in U.S. ranching areas is delaying ranchers’ plans to expand production after the country’s livestock population shrank to the smallest level in 70 years, farmers and analysts said.
The tight livestock supply is hampering meat packers, including Tyson Food (NYSE:), which reports quarterly results on Tuesday, and consumers are confronted with high beef prices.
Meat producers had hoped the rains would encourage ranchers to start rebuilding herds in 2024, after years of drought burned pastures and forced farmers to send more cows to slaughter.
Instead, the drought has worsened over the past two months, dealing another blow to processors who have to pay to buy limited livestock supplies.
In the United States, 62% of livestock were in areas affected by drought at the end of October, the highest number since December 2022, according to the US Drought Monitor.
More than half the herd remained in drought zones last week after rains hit the plains, compared with less than 20% for most of the year and just 8% in June.
In Nebraska, the nation’s second-largest cattle-producing state, rancher Chad Engle said the drought has reduced vast pastures to yellow, brittle stubble and unleashed clouds of dust in corrals that make his cattle cough and wheeze.
“We had plans to expand our herd, but we can’t do that because of the drought,” Engle said, adding that he culled 10% more of his herd than normal last year.
Ranchers in Oklahoma, the fifth-largest U.S. cattle producer, often sow wheat in September, but the drought delayed plantings, leaving ranchers grazing for weeks.
“Drought is the reason why herd sizes have declined so much and it’s the only thing keeping farmers from expanding herds,” said Morningstar equity strategist Kristoffer Inton.
The lack of pasture and high livestock prices have prompted farmers to send female cows, or heifers, and young calves to feedlots earlier than normal to be fattened with grain.
With fewer heifers being kept from breeding on farms, an expansion of the herd will be years away, analysts say.
The spike in livestock costs is hurting meatpackers like Tyson, whose beef business, its largest unit, swung to a loss in the third quarter.
The loss is expected to widen in the fourth quarter, according to investment research firm CFRA, which forecast negative margins of 2.2%.
Early deliveries of heifers and young cattle to feedlots will shift beef production into the first half of the year in 2025 and result in even tighter supply in the second half, said Derrell Peel, an agricultural economist at Oklahoma State University.
