U.S. live cattle futures settled higher on Tuesday as fund buying and short-covering lifted the market to its highest level in six months, said analysts and traders.
Chicago Mercantile Exchange (CME) October live cattle received an added boost from an adjustment to losses during Monday's Goldman Roll, said traders.
Monday was the first of five days for the CME live cattle and hogs Goldman roll. The process involves funds that follow the Standard + Poor's Goldman Sachs Commodity Index rolling some of their October long positions into deferred months.
On Tuesday, CME October live cattle closed up 1.35 cents to 127.1 cents and marked a fresh contract high of 127.475 cents. October also broke through the 200-day moving average of 126.52 cents, triggering fund buying (all figures US$).
December ended up 0.775 cents to 129.975 cents, touching off buy stops after breaking through chart resistance at 129.5 cents.
"December buying erupted after we went through 129.5 resistance like a hot knife through butter," said Oak Investment Group president Joe Ocrant.
Investors waited for cash cattle to change hands at prices steady with last week, underpinned by tight cattle supplies while unprofitable beef packer margins weigh.
No cash bids or asking prices were reported. Last week, cash cattle moved at mostly $124 to $125 per cwt, said feedlot sources.
HedgersEdge.com estimated the average beef packer margin for Tuesday at negative $18.50 per head, compared with positive $12 on Sept. 4.
CME feeder cattle closed weaker amid caution, along with the corn market, before USDA's crop report on Wednesday.
Feeder cattle futures typically trade opposite the move in corn prices because of feed cost implications for cattle feeding operators.
September ended 0.3 cent lower, at 144.65 cents. October closed down 0.225 cent to 146.35 cents.
Most hogs wilt
Aside from October CME hogs, other contracts finished lower on profit taking after futures' short-covering bounce on Monday, said traders and analysts.
Spreaders also sold deferred contracts and bought October with the view hog farmers may not cut their herds as aggressively if corn prices continue to decline.
October lean hogs closed up 0.15 cent at 72.725 cents. December ended down 0.15 cent to 71.425 cents and February closed at 77.275 cents, 0.8 cent lower.
Still, continued heavy hog supplies limited October advances and pressured the average hog price in the most-watched Iowa/Minnesota market for an 11th straight day to $64.86, down six cents from Monday.
Producers hurried hogs to market after the worst drought in more than half a century catapulted feed costs to all-time highs.
And more hogs are arriving at packing plants as cooler weather create less stress to animals, quickening their growth rate.
The government pegged Tuesday's slaughter at 437,000 head. It was 10,000 more than for the same period a year ago and the biggest daily slaughter since an estimated 439,800 on Jan. 6, 2009, according to USDA and analysts.
-- Theopolis Waters writes for Reuters from Chicago.