Source: Rita Jane Gabbett, MEATINGPLACE.COM, 1/31/11

USDA’s twice yearly Cattle report on Friday surprised market analysts by estimating even fewer than expected heifers being held as beef replacements, pointing to still higher cattle prices ahead.

USDA put beef replacement heifers at 5.158 million, a more than 5 percent drop from a year ago. This was 3.4 percent below analysts’ average pre-report estimate according to the CME Group’s Daily Livestock Report.

This is the smallest U.S. beef cow herd since strict “beef cow” inventories began being published in 1965, according to the DLR.

USDA reported all cattle and calves in the United States as of Jan. 1, 2011, totaled 92.6 million head, 1 percent below the 93.9 million a year ago and the lowest Jan. 1 inventory of all cattle and calves since the 91.2 million on hand in 1958.

J.P.Morgan analyst Ken Goldman called the report bullish for cattle prices in the longer run.

“Beef prices already are struggling to keep up with cattle prices, and this report, if it sends cattle prices even higher on lower supply than anticipated, may exacerbate the situation,” Goldman wrote in a note to investors. “We thus interpret the data as incrementally negative for packers such as Tyson, which buy cattle and sell beef.”

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