By Julie Ingwersen and Heather Schlitz

Drought Impacting U.S. Cattle Production

CHICAGO (Reuters) – The return of drought in U.S. cattle-producing areas is delaying ranchers' plans to expand production after the nation's herd shrank to its smallest level in seven decades, according to farmers and analysts.

Tight cattle supplies are squeezing meatpackers like Tyson Foods, which reports quarterly earnings on Tuesday, and consumers grappling with high beef prices.

Meat producers had hoped rains would encourage ranchers to rebuild herds in 2024 following years of drought, but worsening dryness has hindered recovery efforts and forced processors to pay more for limited cattle supplies.

As of late October, 62% of cattle were in drought-affected areas, the highest since December 2022, as drought conditions intensified. More than half of the herd remains in these areas, despite recent rains in the Plains.

In Nebraska, a major cattle-producing state, ranchers report severe pasture damage, prompting them to cull more of their herd than usual. Rancher Chad Engle noted that drought conditions have made it impossible to expand his cattle population.

Oklahoma ranchers have also been adversely affected, with delayed wheat plantings affecting grazing availability. Analysts assert that drought is a significant factor in reduced herd size and ranchers' reluctance to expand.

Due to the lack of pasture and high cattle prices, ranchers are sending heifers and young calves to feedlots earlier than normal, impacting long-term herd expansion.

The rising cost of cattle is negatively affecting meatpackers like Tyson, which has reported losses in its beef unit and anticipates widening losses in the fourth quarter.

Experts predict that early deliveries of heifers to feedlots will lead to skewed beef production in 2025, with a smaller supply anticipated in the latter half of the year.