Chicago Mercantile Exchange lean hog futures on Tuesday reached their highest level since mid-February, fueled by strong cash and wholesale pork prices, traders said. 

June futures led gainers after investors bought that contract and sold deferred months, prompted by bullish market fundamentals, traders said. 

June closed 1.475 cents per pound higher at 78.725 cents, and July 1.125 cents higher at 79.475 cents. 

Processors purchased hogs while taking advantage of their profitable margins. They were also able to sell pork to retailers that are gearing up for U.S. Memorial Day holiday grilling demand. 

"Packers can afford to pay up for hogs and still make money, and the cutout was up a bit," said Brock Associates Inc analyst Doug Houghton. 

Tuesday afternoon's average cash hog price in Iowa/Minnesota was at $70.76 per cwt, $1.05 higher than on Monday, the U.S. Department of Agriculture said. 

USDA data on Tuesday afternoon reported the average wholesale pork price up $1.11 cwt from Monday to $85.08, mostly led by $6.50 higher pork bellies. 

Cattle Futures Fall

CME live cattle sank to a five-week low on weaker cash price outlook and sentiment that wholesale beef demand is about to top out seasonally, traders said. 

However, they said bargain buying and futures' discounts to this week's expected cash prices lifted contracts from session lows. 

June closed 0.550 cent per pound lower at 121.900 cents. August closed 0.550 cent lower at 118.250 cents, and below the 20-day moving average of 118.320 cents. 

Tuesday afternoon's average wholesale beef price, or cutout, rose 48 cents per cwt to $249.88 from Monday. Select cuts dropped $1.11 to $224.39, the USDA said. 

Market-ready, or cash, cattle last week brought $137 to $138 per cwt, which was down from $140 to $147 a week earlier. 

Investors look for Wednesday morning's Fed Cattle Exchange sale of roughly 2,300 animals to set the tone for this week's cash trade. 

Despite their impressive margins, packers might cut cash bids in anticipation of a potential pullback in beef demand, which typically subsides after most grocers buy all they need for the upcoming holiday, a trader said. 

Average beef packer margins for Tuesday were a positive $109.45 per head, up from a positive $85.45 for Monday, as calculated by HedgersEdge.com. 

CME live cattle selling and steady-to-lower cash feeder cattle prices dragged down the exchange's feeder cattle contracts. 

May feeders settled 1.575 cents per pound lower at 140.950 cents.