CHICAGO (Dow Jones)--U.S. livestock futures rallied Thursday, as cattle prices got a boost from strong packer demand and increased optimism about the economy.
CME live cattle for August delivery ended up 1.775 cents, or 1.6%, to $1.14725 per pound. August feeder cattle gained 2.95 cents, or 2.1%, to $1.439.
Prices were buoyed by higher equities, which climbed on positive U.S. jobs data. The prospect of a strengthening economy bodes well for domestic meat demand, which has been sluggish this year as retail prices for beef and pork surged to record highs that scared away some consumers.
Meanwhile, after light trade last week, packers find themselves short of the supplies they need to keep up their slaughter rates, said Randy Fisher, head of Fisher Commodities Services.
"Margins are good, and they need the inventory," Fisher said.
Scot Miller, head of Scot A. Miller & Associates, said the strength appeared to have more to do with fund buying than any shift in market supply and demand dynamics. Traders are awaiting movement in the cash market to provide further direction.
Goldman Sachs on Thursday increased its price forecasts for live cattle, saying lower cattle placements will push fed cattle supplies "sharply lower" by year-end. The bank raised its three-month price forecast 25 cents to $1.20 per pound, and its six-month forecast by 15 cents to $1.30.
The cash cattle markets remained at a standstill Thursday. Cattle owners raised their asking prices as futures prices rallied sharply. Near midday, cattle in the Texas Panhandle were priced at mostly $1.16 a pound and in Kansas from $1.15 to $1.16, compared with $1.14 to $1.15 a pound early in the day. Bids were reported from $1.08 to $1.09 a pound.
In Nebraska, dressed bids at $1.80 a pound were countered by asking prices at mostly $1.85 a pound.
Sales in Texas last week were from $1.12 to $1.13 a pound, with the majority at $1.1250 a pound, and in Kansas at mostly $1.12 a pound. In Nebraska, sales last week were from $1.78 to mostly $1.80 a pound on a dressed basis and $1.11 to $1.1250 a pound live.
The U.S. Department of Agriculture's midday beef price quote for choice grade carcasses Thursday was up 69 cents to $180.07 per hundred pounds, and select rose 54 cents to $174.47 per hundred pounds on 165 total loads.
The latest HedgersEdge packer margin index was plus $29.25 a head, compared with $27.05 the previous day. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.