CHICAGO (Dow Jones)--U.S. live cattle futures climbed Tuesday as the market continues to get support from last week's higher cash prices, and expectations that wholesale beef prices will continue to strengthen.
CME live cattle for October delivery was recently up 0.45 cents to $1.1985 a pound. October feeder cattle was up 0.975 cents to $1.365.
Last week's jump in cash bids remains a supportive factor in the market, and bids are expected to hold steady or climb again later this week. With the jump in cash bids, attention has turned to the wholesale beef market for signs that packers are able to pass on those costs and that demand is solid.
Wholesale beef prices climbed on Monday, and should continue to gain "to justify the rally we saw last week in the cash market," said Randy Fisher, head of Fisher Commodities in Kansas.
Robust export demand is helping fuel strength in the market, even as domestic demand has been sluggish amid a troubled economy. Fisher added that expectations of tightening supplies is also supportive. A severe drought in the southern Plains has prompted ranchers to push animals into feedlots sooner because of a lack of pastureland. However, analysts say, animals are at lower weights as a result, and ultimately available supplies will start to run short.
"The cattle market knows we're going to run into a shortage not too far down the road," Fisher said.
But the market could soon face seasonal pressure, said Don Roose, president of U.S. Commodities in Des Moines, Iowa. He said seasonal trends show that futures typically rally in early September but "stall out" around Sept. 13 or 14.
Expectations for cash cattle prices this week range from steady to higher on continued strong beef exports and fewer animals offered for sale compared with the previous week. Initial asking prices are expected to be $1.20 a pound on a live basis.
No bids have been reported yet, and they likely will not be established until Wednesday or later.
Cattle sold last week from $1.17 to $1.18 a pound on a live basis in Texas and Oklahoma. In Kansas, the reported range was from $1.16 to $1.18 with the majority at $1.18.
In Nebraska, cattle sold on Friday at $1.17 to $1.18 a pound live basis, following sales Thursday at mostly $1.87 a pound dressed and $1.17 live.
The U.S. Department of Agriculture reported choice and select boxed beef prices Monday up $1.70 a hundred pounds at $181.83 and $172.99 respectively. Beef sales on the day were reported at 178 total loads.
The latest HedgersEdge packer margin index was plus $3.30 a head, compared with $13.25 the previous day. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.