Chicago Mercantile Exchange live cattle futures rose to two-month highs on Tuesday as wholesale beef prices extended gains, stoking optimism for higher prices this week in Plains cash cattle markets, traders and analysts said.
Feeder cattle futures also were higher, while lean hogs fell for the fifth straight session.
"There continues to be an underlying bid in the cattle market," said Craig VanDyke, broker at Top Third Ag Marketing.
CME April live cattle finished 1.000 cent higher at 119.900 cents per pound, the highest since Jan. 20. Most-active June cattle were up 1.250 cents at 111.050 cents, the highest in nearly a year.
CME April feeder cattle settled 0.175 cent higher at 132.625 cents, holding near Monday's multimonth high of 133.70 cents. Several deferred live and feeder cattle contracts notched life-of-contract highs for the second straight day.
Traders awaited direction in Plains cash cattle markets. About 4,000 head were expected to be for sale on Wednesday at the weekly Fed Cattle Exchange online auction. Last week, sales averaged $128.40 per cwt, a nearly $10 premium to April live cattle futures.
"Should we be at that big of a discount?" VanDyke said of live cattle futures. "You can argue either way, but it keeps the sellers less aggressive."
Cattle futures were discounted to cash prices because investors largely expected cattle prices to decline this summer amid ample supplies. However, beef prices have surged, propping up prices both for cattle and their underlying futures.
The U.S. Department of Agriculture said choice-grade wholesale beef was $1.17 higher at $224.93 per cwt, the highest levels since June.
USDA will release monthly cold storage data on Wednesday and the Cattle on Feed report on Friday.
Lean hog futures fell to the lowest levels in 11 days, pressured by technical selling tied to recent losses in prices for cash hogs and wholesale prices. April lean hog futures were down 0.650 cent to 68.000 cents per pound and June hogs down 1.050 cents to 76.325 cents.
The USDA after the close of futures trading said wholesale pork eased 50 cents to $80.96 per cwt and hogs in Iowa and southern Minnesota were 27 cents higher at $66.91 per cwt.