U.S. live cattle and lean hog futures rose more than 1 percent on Tuesday, lifted by spreading and investment fund buying backed up by robust demand from meat packers, traders and analysts said.
Beef and pork packers were capturing big profit margins given higher meat prices and comparatively lower prices for the animals they slaughter. Supplies of both cattle and hogs are large and the packers were willing to pay slightly elevated levels to encourage producers to bring their animals to market.
"The packers are making money killing and they have to pay up to get cattle," said Schwieterman Inc broker Domenic Varricchio.
Chicago Mercantile Exchange October live cattle futures was up 2.275 cents to 113.700 cents per pound, gaining on the more active
December contract as investors continued to exit short positions in the October. December cattle finished up 1.875 cents to 118.800 cents per pound, highest since July 21.
Varricchio said traders were building options positions at the December strike price of 124 cents per pound, suggesting some investors anticipated even higher prices.
Traders also were awaiting deals this week in U.S. Plains cash cattle markets. About 1,400 cattle would be offered at the weekly Fed Cattle Exchange online auction on Wednesday, according to the auction website.
CME November feeder cattle futures finished up 0.650 cent to 156.150 cents per pound.
CME October lean hogs were up 1.150 cents to 60.175 cents per pound and most active December hogs up 0.600 cent to 61.550 cents.
Wholesale pork prices were slightly higher and choice-grade beef prices lower, according to the U.S. Department of Agriculture.
Hogs traded 80 cents higher to $55.22 per cwt in the top cash market of Iowa and southern Minnesota, USDA said.