Meat prices are poised to extend a 14 percent rally this year that drove U.S. retail costs to the highest levels since the 1980s as surging corn futures prevent livestock producers from expanding their herds.

The U.S. cattle herd in July was the smallest since 1973 and the number of breeding hogs last month was near the lowest ever, government data show. Corn futures jumped to a two-year high today and the price of the main feed ingredient is more than 70 percent above the 10-year average.

U.S. per-capita beef supplies next year will be the lowest since 1952 and pork the smallest since 1976, industry researcher CattleFax said. Hog futures will rise 14 percent by July and cattle may gain 3.6 percent by April, according to a Bloomberg survey of analysts. Wendy's/Arby's Group Inc., the maker of the 1,360-calorie Baconator Triple burger, and CKE Restaurants Inc., owner of the Hardee's chain, have warned investors they are contending with higher commodity costs.

"If grain prices go up, then meat prices are going to have to move up," said Mark Greenwood, a vice president at AgStar Financial Services Inc. in Mankato, Minnesota, who oversees $1 billion in loans and leases to the hog industry. Corn costs "tempered any enthusiasm there was on expansion," he said.

Eoin Treacy's view With corn and soybeans finding support at the upper side of their bases and rallying impressively, the chances that food prices are going to experience upward pressure has increased. Pork Bellies liquidity has practically disappeared because of a lack of supply which is as a result of a combination of higher feed prices and tighter credit affecting supply

A smaller US beef herd means that in the absence of a severe contraction in demand, prices are only likely to go higher. Live Cattle have posted a progression of higher reaction lows for more than year and found support above $95 last week. A sustained move below that level would be required to question medium-term upside potential.