Cattle and beef prices "will remain strong for several years" because of US farmers' reluctance to rebuild herds, after being caught out by the failure of the last expansion cycle, a leading academic has said.

History would suggest that cattle farmers should be in the late stages of the expansionary phase in the US cattle cycle, which typically repeats every 10-15 years, Purdue University economist Chris Hurt said.

However, the growth trend which started in 2005 "aborted" two years later as higher feed prices squeezed margins, catching out livestock farmers who were banking on a longer period of revival.

"After several years of financial difficulty, producers show no interest in rebuilding the herd," Mr Hurt said.

"Low calf prices and large losses in cattle feeding since 2007 have continued to discourage beef cow expansion."

'Financially rewarded'

However, the reluctance to increase herds, a factor which would eventually feed through into greater beef supplies, will support prices – potentially for several years, given the degree of the sector shakedown and the help that economic revival is giving to demand.

"For the next several years, beef supplies will be small, and many people still love beef," Mr Hurt said.

"This likely means that beef cow ownership will be financially rewarded."

Prices would "remain strong well into the future, perhaps for three to five years."

Heifer indicator 

The comments follow data on Friday showing that America's cattle herd dwindled to 100.8m head as of the start of the month, down 1.2% year on year and the lowest July 1 figure on record.

The beef herd fell by 2% to 31.7m animals, a decline which looks unlikely to reverse given the lack of future breeding stock being retained.

"Producers reported they were retaining 2% fewer beef heifers to go back into the herds," Mr Hurt said.

"This seemingly assures that beef cow numbers will continue to drop into early 2011."

Dairy farmers, however, raised their heifer quota by nearly 3%, raising surprise among some observers, given their continued losses.

Live cattle, which topped 100 cents a pound in April, closed up 0.125 cents in Chicago on Monday at 91.975 cents a pound for August delivery.

Feeder cattle for August ended 0.125 cents lower at 113.65 cents a pound. The contract hit 115.975 cents a pound on Friday, the highest for a spot lot for nigh on two years.