Theopolis Waters, Reuters  |   January 27, 2012

CHICAGO - U.S. cattle futures settled higher Friday, and up slightly for the week, on short-covering while investors waited for this week's cash cattle sales and U.S. Department of Agriculture's cattle inventory report later Friday, analysts said.      

Analysts polled by Reuters expected the USDA data to show the smallest U.S. cattle herd since the early 1950s.       

Chicago Mercantile Exchange live cattle chopped around throughout the morning amid a standoff between packers and feedlots about this week's cash sales.      

Plains cattle are bid at $122 per cwt against $127 to $130 asking prices, up $1 to $4 from a week ago.    

CME live cattle on Wednesday posted a new high of 126.375 cents, lifted by last week's cash price strength. That fueled initial speculation that packers would again "chase" cattle this week that are in short supply.

There are fewer cattle available for slaughter overall after a severe drought in the southwestern United States destroyed pastures and for several months early last year forced cattle into feedlots at lighter weights.      

To avoid raising bids for supplies, packers who are operating with extremel ynegative margins have trimmed slaughter rates and the practice is expected to continue next week.     

An obstacle to higher cash returns include slowed wholesale beef demand. And more cattle are in feedyards in the northern Plains, with some heavier, than a week ago due to milder-than-anticipated weather.          

Benchmark February cattle closed up 0.150 cent at 124.700 cents per lb, with April 0.400 cent higher at 128.450 cents.     

CME feeder cattle futures closed higher on short-covering and tight feeder cattle supplies, which sent the benchmark March contract to a new high of 154.90 cents.     

March futures closed 0.975 cent higher at 154.600 cents.    

       
HOGS REBOUND AS SHORTS COVER    

CME lean hog futures ended higher, and were up slightly for the week, on pre-weekend short-covering and talk of higher cash hog prices.    

"People are having a tough time trying to figure out cash direction given the way cash has been bouncing around lately based on USDA's reporting," a CME hog trader said.    

U.S. Midwest cash hogs traded steady to mixed on Friday, with western values higher while some eastern prices were lower, cash hog dealers said.      

February hogs settled up 0.725 cent per lb at 86.675 cents. April hogs settled 0.575 cent higher at 87.375 cents.