U.S. live cattle prices closed higher Monday on stronger beef prices and follow-through buying after cash cattle prices climbed last week.
CME live cattle for October delivery ended up 0.95 cents, or 0.8%, to $1.194 a pound. October feeder cattle was up 0.675 cents to $1.35525.
A sharp increase in cash cattle prices Friday was considered supportive, but traders said they are also watching boxed-beef prices to see if they follow. A jump in boxed-beef prices reported Monday reaffirmed that the cash market gains were sustainable and bolstered futures, analysts said.
The market climbed despite pressure from outside markets, particularly equities, which fell Monday as worries about Europe's debt crisis persist. The pressure from equities is negative for live cattle, said Tom Leffler, head of Leffler Commodities, a Kansas brokerage. Beef consumption is typically tied to the strength of the economy.
"I think the price is too high," Leffler said of live cattle. "I'm concerned about demand. I'm concerned about the economy."
Lackluster domestic consumption has been offset in part by strong export demand, although Leffler said that recent strength in the dollar could start to eat into exports as well.
The historic drought in the southern U.S. Plains continues to push excess supply into the market. Linn Group analyst John Ginzel said the number of cattle being slaughtered remains "abnormally large" in response to the drought.
Feedlots and producers will continue to have higher numbers of cattle to slaughter as they push through animals that drought-hit ranchers in the south hurried to sell earlier this summer, analysts said.
Eventually, the drought will mean smaller supplies as animals have been sent to slaughter earlier than usual.
No cash cattle bids are available yet and none expected until at least Wednesday. Cattle owners will likely ask in the area of $1.20 a pound live weight for their animals this week.
Sales last week in Texas/western Oklahoma were from $1.17 to $1.18 a pound live, up four to five cents a pound from the previous week. In Kansas, cattle traded at mostly $1.18 a pound, five cents higher than the week before.
Dressed sales in Nebraska last week were at mostly $1.87 a pound, generally six cents higher. Live sales there on Friday were from $1.17 to mostly $1.18.
The U.S. Department of Agriculture reported choice boxed beef prices midday Monday up $1.66 to $181.79 a hundred pounds and select beef up $1.51 to $172.80 a hundred pounds on 132 total loads.
The latest HedgersEdge packer margin index was plus $13.25 a head, compared with $13.55 the previous day. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.