Analysts on average had been expecting a 2.5 percent increase in the July 1 supply.

"It is showing a more significant drought influence than what was anticipated," said Jim Robb, an economist with the Livestock Marketing Information Center. "Cattle being grazed were forced into feedlots especially in the central and northern Plains."

The larger cattle supply will probably mean lower cattle prices in the weeks ahead. Shortly after the report was released, cattle traded at US$79 to $79.50 per hundredweight in Kansas and Texas, down US$2 from a week ago.

The report also should have cattle futures at the Chicago Mercantile Exchange trading as much as 2 cents per pound lower on Monday, analysts said. The maximum allowable daily decline is 3 cents.

Cattle futures are quoted in cents per lb, while cash markets are in dollars per hundredweight.

"We expect at least another two weeks of price weakness," said Rich Nelson, analyst at Allendale Inc, who said cash cattle could trade US$1 lower next week.

The Friday report showed a 10 percent increase in the number of young cattle placed in feedlots in June versus a year ago. That shocked analysts, who on average expected about a 2.5 percent decline in placements.

Young cattle weighing less than 700 lbs accounted for that increase. These cattle normally are kept on pastures, but the drought forced them into feedlots, analysts said.

The lack of pastures also may have slowed or temporarily halted plans by ranchers to expand herds. Several years of profitable cattle prices have had analysts predicting the profits would encourage producers to enlarge herds.

A USDA cattle inventory report, also released Friday, showed the total US herd at 105.7 million head, up 1 percent from a year ago. But beef herd breeding stock in that report was about unchanged.

"It really shows minimal expansion. The total cow number is basically unchanged, the number of heifers being held back for beef cow replacement was unchanged as well as the number of bulls," said Dan Vaught, A.G. Edwards analyst.