Slow herd expansion will underpin cattle markets this year. Fed cattle prices are forecast to average 90 per dollar cwt in 2007— the highest annual average in history. However, soaring corn prices have dulled the outlook for feeder cattle and calves.Cattle numbers increased slightly in 2006 but drought dramatically slowed the pace of expansion. The nation's cattle herd climbed to 97.0 million head on Jan. 1, 2007, up 300,000 head from last year. Cattle numbers bottomed three years ago at 94.9 million head. In contrast with last year's small increase, the total cattle inventory jumped 1.3 million head in 2005. Prior to the drought last year, we had expected a similar increase in herd size in 2006. Instead, cow slaughter jumped 12% last year, reflecting the extreme drought in the Plains and portions of the western Corn Belt. In addition, poor pastures forced cattle into feedlots and limited heifer retention.
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