CHICAGO (Dow Jones)--U.S. livestock futures were mostly higher Tuesday, as live cattle gained on strong wholesale beef prices following last week's jump in cash cattle values.
CME live cattle for October delivery ended up 0.2 cent to $1.196 per pound, while October feeder cattle jumped 1.5 cents, or 1.1%, to $1.37025.
The firm wholesale beef prices reaffirm that gains in cash cattle last week are sustainable, analysts said. Traders have been looking for signs that packers, after paying more for cattle, would be able to successfully pass along those costs.
"Futures traders would not have been as willing to buy the market if not for the wholesale strength," said Dan Vaught, head of Vaught Futures Insight.
Feeder cattle futures jumped to their highest level in almost a month on a reversal in feed grain prices, added Mike Zuzolo, head of Global Commodity Analytics & Consulting.
Cattle owners are seeking higher prices for their animals, driven in part by smaller showlists, or number of cattle offered for sale, and expectations for wholesale beef prices to move higher. In addition, export sales of U.S. beef remain strong, helping boost overall demand. Strength in nearby live cattle futures contracts is also encouraging cattle owners to ask for higher prices in the cash markets.
Traders say the futures market also has been supported by expectations that supplies will tighten later this fall, following a surge in supplies this summer as drought forced ranchers to place their animals in feedlots sooner than usual.
Cattle are priced at $1.20 a pound on a live basis and $1.90 or more a pound dressed, analysts say. Sales last week in Texas and western Oklahoma were from $1.17 to $1.18 a pound. In Kansas, cattle traded at mostly $1.18 a pound. Dressed sales in Nebraska last week were at $1.87 a pound, with live sales from $1.17 to mostly $1.18 a pound.
The U.S. Department of Agriculture reported choice boxed beef prices midday Tuesday up $1.92 to $183.75 a hundred pounds and select beef up $1.20 to $174.19 a hundred pounds on 98 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.