The U.S. beef herd is likely to continue contracting for the next couple years, and swine, dairy and poultry numbers also are down. This month’s Livestock, Dairy and Poultry Outlook report from the USDA’s Economic Research Service notes that declining dairy cow inventories, no growth in dairy replacement heifer inventories, and beef heifer inventories that are declining more rapidly than beef cow inventories imply continuing liquidation of the national cow herd.

Heifers going to feedlots instead of into breeding herds contribute to short-term beef supplies, but the combination of fewer replacement heifer, increased short-term heifer beef, and declining overall placements of cattle in feedlots will likely result in reduced beef supplies into 2012 or beyond. The current liquidation phase began in 2005, peaked and in 2007 according to the report.

July 1 dairy cow inventories declined by 1.6 percent from the same date last year, a reversal of the recent expansion trend and the first decline since July 1, 2004. Milk replacement

heifer inventories were unchanged from July 1, 2008, suggesting herd reductions are leveling off, since the number is based on a smaller cow herd meaning the ratio of heifers to cows increased. However, the report notes continued poor returns will likely dampen most expansion plans.

Poultry production declined significantly during the first and second quarters of 2009, but broiler production should approach last-year’s levels during the second half of this year. With only a small decline in production and lower exports, the forecasts for broiler ending stocks were increased for the third and fourth quarters. Turkey meat production is expected to continue much lower than the previous year in second-half 2009.

Summer prices for hogs and pork cuts continue to languish at year-over-year lower levels due to lackluster demand for pork products. Second-quarter pork exports were 31 percent lower than a year ago, largely due to lower demand for U.S. pork in Asia.

Read the full report from USDA.