The expansion in supply probably won't last long because it will “curtail the already limited availability of calves this fall,” Goldman Sachs Group Inc. analysts said in a report last month. The bank anticipates a futures price of $1.15 in three months and $1.30 in 12 months. Prices next year may exceed the Feb. 22 record of $1.315, Rabobank estimates.

“Our U.S. cow-herd population is low, and there's not going to be much adding to the herd with the drought going on,” said Henry Beel, 40, who co-owns a 1,200-head cattle business with his brothers near Johnstown, Nebraska. Beel Brothers LLC has reduced its breeding herd by selling heifers to feedlots, which means “there's going to be a smaller amount of cattle available to the packing plants” next year, he said.

The slide in output may not stop until 2016 or 2017, Rachel J. Johnson, a USDA livestock economist, wrote in an Aug. 16 report. Once the herd starts to expand, it takes more than two years to boost supplies, according to Ron Plain, a livestock economist at the University of Missouri. Calves have a nine-month gestation period and take about 20 months to reach slaughter weight, he said.

Eoin Treacy's view The US drought continues to put pressure on a significant proportion of the farming community. Many are responding to the challenge by advancing the slaughter schedule for their animals in an effort to control costs. The result is that supply has increased at least temporarily but this is unlikely to last since there will be less new supply next year. This could put upward pressure on prices over the medium term.

The S&P GSCI Agriculture Index rallied to break its 15-month downtrend in June and proceeded to accelerate higher to test the 2011 peak. It has at least paused above 500, having become overbought in the short-term, but a sustained move below that level would be required to indicate more than temporary supply dominance. The bulk of the recent advance has been caused by the run-up in grain and bean prices.

Feeder cattle dropped abruptly from mid-June before finding at least short-term support in the region of $130. It has held a progression of higher reaction lows over the last month and while technical damage has been done, a sustained move below $140 would be required to question potential for some additional higher to lateral ranging.

The December contract for Live Cattle is testing its highs but is susceptible to some additional consolidation of recent gains and will need to sustain a move to new highs to reaffirm medium-term demand dominance.

Lean Hogs prices continue to deteriorate and a break in the progression of lower rally highs will be required to question downward momentum beyond scope for a brief pause.

The USDA Georgia Dock Chicken Boneless/Skinless Breast Spot Price chart has held a progression of higher reaction lows since early 2011 and has rallied impressively over the last month to test the recovery highs.