U.S. hogs spiked by two per cent in early trading Monday, partly driven by hopes of a U.S. "fiscal cliff" resolution that ignited fund buying across a wide range of commodities and equities markets, said analysts and traders.
"Everything followed the stock market higher. In this environment, no one will be able to stay on the short side for long," said independent hog futures trader Dan Norcini.
Hog futures received extra support from Friday's higher cash hog and wholesale pork, or cutout, prices that sparked active short-covering.
There is sentiment in the market that cash hog prices and the cutout may bottom out soon, said R.J. O'Brien hog futures trader Tom Cawthorne.
Upward market momentum carried Chicago Mercantile Exchange December hogs to a four-and-a-half-month top. February posted a fresh contract high of 87.875 cents in after-hours trading.
Spot-December hogs settled 1.125 cent per pound higher, or 1.4 per cent, at 81.45 cents. February closed at 87.425 cents, up 0.975 cents or 1.13 per cent (all figures US$).
Still, futures closed off session highs as the December trading month surpassed CME's lean hog index at 79.97 cents.
And, some investors were cautious about cash hog price direction immediately following the U.S. Thanksgiving Day holiday on Nov. 22.
Packers will be closed at least one day this week because of the holiday, but could raise bids for hogs if they need supplies for early next week, a trader said.
The average hog price in the eastern Midwest hog producing region Monday morning dropped $1.19 per hundredweight (cwt) from Friday to $71.66, according to the U.S. Department of Agriculture.
Live cattle futures firmed, aided by Wall Street's strong rally and the move up in wholesale beef prices, said traders and analysts.
The wholesale price for choice beef Monday morning was $194.08/cwt, $1.06 higher than Friday, said USDA.
Before settling in the bottom half of its trading, February live cattle drew initial support from fund buying when it broke through the 200- and 100-day moving average resistance levels of 130.24 and 130.54 cents.
CME December live cattle closed up 0.45 cent/lb., or 0.36 per cent, to 126.6 cents. February ended at 130.15 cents, up 0.125 cent or 0.1 per cent.
December futures led advances as investors priced in what they believe could be a $126/cwt cash cattle trade this week given futures' advances and encouraging wholesale beef values.
Cash cattle last week traded at mostly $125 to $126.
While some packers may look to buy cattle to fill in slaughters for the remainder of this week, others are booking animals for next week -- the first full week of processing after the holiday.
Meanwhile, traders at times sold February futures and bought June and August on spreads based on last Friday's government monthly cattle-on-feed report.
The data showed placements last month dropped 13 per cent from a year ago.
"The report was considered rather neutral, but confirms the trend of tighter cattle numbers in the coming months," said Oak Investment Group president Joe Ocrant.
Feeder cattle at the CME firmed followed the firmer live cattle market.
January closed 0.4 cent/lb. higher, or 0.27 per cent, at 146 cents. March closed up 0.275 cent, or 0.19 percent, to 148.4 cents.
-- Theopolis Waters writes for Reuters from Chicago.