Cattle futures rallied to a record for the second time this month on signs that rising demand for U.S. beef will erode supplies that are shrinking as ranchers reduce the size of their herds.

Beef output will drop 4.9 percent next year after high feed costs led ranchers to slaughter more breeding cows, the U.S. Department of Agriculture said Oct. 12. The cattle herd totaled 100 million head on July 1, the lowest for that date since at least 1973. Beef exports this year through August were up 27 percent, and meat producers say yesterday’s approval of three U.S. free-trade agreements will boost sales further.

Cattle futures have surged 25 percent in the past year, and the government said last month that retail-beef prices will rise by as much as 9 percent this year, more than any other major food group. Increased costs are squeezing profit margins for restaurant owners including Texas Roadhouse Inc. and Cracker Barrel Old Country Store Inc.