U.S. cattle futures were higher in nearby months Tuesday as traders gauged an increase in wholesale beef prices against general concerns over market weakness.
Live-cattle futures for August delivery, the most actively traded contract, rose 0.40 cent, or 0.4%, to $1.0445 a pound at the Chicago Mercantile Exchange. The October futures contract traded 0.12 cent, or 0.1%, higher at $1.1085 a pound. Distant months were lower.
Feeder-cattle futures rose, with the August contract up 1.62 cents, or 1.3%, at $1.2640 a pound, as prices for corn used to fatten cattle slid.
Analysts said cattle futures are struggling to find a clear direction as prices have bounced off recent lows after a nearly two-month selloff, yet strong, slaughter-ready supplies and steady declines in wholesale beef prices are expected to limit gains.
Traders are likely to take signals from cash trading this week as they gauge near-term demand from packers.
"We have bounced off some support," said Brian Hoops, president of Midwest Market Solutions, a brokerage firm in South Dakota. "The futures market is looking to the cash [market] for direction."
Providing support for prices was a one-day jump in a wholesale-beef-prices report by the U.S. Department of Agriculture, breaking a seven-day string of declines for choice beef and eight days of declines for select beef. On Monday, the agency reported choice beef up $1.44 to $172.99 a hundred pounds. Select beef was quoted up 38 cents to $165.75 a hundred pounds.
The slight climb was seen coming from a pickup in grocer demand as weather conditions for outdoor grilling improve and buying for last-minute supplies for the U.S. Father's Day holiday on Sunday.
Still, concerns remain over beef demand as weather turns from warm to hot and consumers eat lighter. At the same time, cattle supplies are expected to remain strong.
"The slaughter rate remains aggressive; can beef values find support with increasingly heavy volumes of product being offered?" wrote Ben Parks an analyst for INTL FCStone Inc. in a morning note to clients.
Cash-cattle bids still aren't established, and the week's trading may not turn active until Thursday. Asking prices seen so far are at the upper end of last week's trading range or slightly higher, analysts said.
The latest HedgersEdge packer margin index is plus $55.40 a head, compared with $49.00 a head the previous day. This is an estimate of packer returns on the cattle they slaughter and process expressed in the form of an index.
Tuesday's cattle slaughter is projected to be about 130,000 head.