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Drought delays ranchers' plans to expand herds

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High cattle prices and lack of pasture force early feedlot

deliveries

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Tyson Foods' ( TSN ) beef business faces losses due to tight

cattle

supplies

By Julie Ingwersen, Heather Schlitz

CHICAGO, Nov 11 (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, farmers and analysts said.

Tight cattle supplies are squeezing meatpackers, including

Tyson Foods ( TSN ), which reports quarterly earnings on

Tuesday, and consumers facing high beef prices.

Meat producers had hoped rains would encourage ranchers to begin

rebuilding herds in 2024 after years of drought burned up

pastures and forced farmers to send more cows to slaughter.

Dryness has instead worsened over the past two months in

another blow to processors that must pay up to buy limited

cattle supplies.

Across the United States, 62% of cattle were in areas

suffering from drought at the end of October, the most since

December 2022, according to the U.S. Drought Monitor.

More than half the herd remained in drought zones last week

after rains hit the Plains, up from less than 20% for most of

the year and just 8% in June.

In Nebraska, the nation's second-biggest cattle-producing

state, rancher Chad Engle said dryness has reduced sprawling

pastures to yellow, brittle stubble and unleashed plumes of dust

into corrals that make his cattle cough and wheeze.

"We had plans to expand our herd but we cannot do that in

the teeth of a drought," said Engle, 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 drought delayed

plantings, depriving ranchers of weeks of grazing.

"Drought is the reason why the herd size has come down so

much and it's the only thing holding back ranchers from

expanding the herd," Morningstar equity strategist Kristoffer

Inton said.

The lack of pasture and high cattle prices have prompted

ranchers to send female cows, or heifers, and young calves to

feedlots sooner than normal to be fattened on grain.

With fewer heifers held back on farms to reproduce, an

expansion of the herd remains years away, analysts said.

The spike in cattle costs is hurting meatpackers such as

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 predicted

negative margins of 2.2%.

Early deliveries of heifers and young cattle to feedlots

will skew beef production in 2025 toward the first half of the

year and result in an even smaller supply in the second half,

said Derrell Peel, Oklahoma State University agricultural

economist.