Cattle futures extended a rally to a record amid shrinking supplies of U.S. beef and increasing demand for the meat as grocers boost purchases before the Christmas holiday.

U.S. commercial beef output in the 10 months through Oct. 31 fell 1.1% from the same period in 2011, says the USDA. The herd as of July 1 shrank to the smallest since at least 1973. Ranchers culled herds after the worst drought since 1956 eroded crop yields, sending corn, the main ingredient in feed, up as much as 68% since mid-June.

Grocers are stocking up on beef, which is often served as part of the Christmas meal, before the Dec. 25 holiday, says Christian Mayer, a market adviser at Northstar Commodity Investments Co. Consumers may pay as much as 6.5% more for the meat in 2012, the biggest increase of any food item, says USDA.

“The number of cattle is still really tight,” Mayer says in a telephone interview from Minneapolis. “People are buying beef. They need to buy it especially for holiday orders,” he says, referring to grocer purchases.

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