By Julie Wernau

Live cattle futures reversed course to end higher Monday, with traders pointing to higher-than-expected demand from packers trying to take advantage of strong margins.

CME live cattle for June was up 1.9% to end at $1.21475 a pound and August futures were up 2.6% to end at $1.18275 a pound.

As of June 1, cattle on feed in feedlots is above 11 million for first time since January 2013, leading expectations that cattle supply will increase in August. But Monday, boxed beef prices were higher following last week's slump, with select boxed beef up $2.08 and choice 3 cents higher.

"Packer margins are huge. So, while there are big numbers on the horizon, the packers want to secure beef now to take advantage of those margins," said Don Roose, president of risk management firm U.S. Commodities Inc., in Des Moines, Iowa.

Packer margins have been strong, with the latest HedgersEdge packer margin index per cattle at plus $242.20. Today's slaughter was pegged at 117,000 head versus 110,863 a year ago.

The futures market for August is trading at a discount to the cash market, with speculators betting on higher prices at a near record net long position with news that China has opened its market to U.S. beef and Brazil has had issues with tainted beef.

Lean hogs traded higher, with July futures up 2% at 87.025 cents a pound.

"The cash market has been nonstop hot in hogs," said Craig VanDyke, an analyst with advisory firm Top Third Ag Marketing.

Mr. VanDyke said the rally is a demand-driven, not a supply driven rally with steady demand from Mexico for pork and bacon from the U.S. The market is closely watching to see if cash prices, which are higher than futures prices, will begin to take a turn lower as the livestock market closes in on a season in which cheaper cuts dominate summer barbecues. Cash hogs were steady to lower Monday and cutouts were steady to higher with a kill pegged at 430,000 compared to 435,000 last week and 426,000 last year.

Write to Julie Wernau at julie.wernau@wsj.com

(END) Dow Jones Newswires

June 26, 2017 16:01 ET (20:01 GMT)