KANSAS CITY (Dow Jones)-- Live cattle futures settled higher Friday as concerns over feed costs eased following reports the government would delay a decision on whether to permit higher ethanol levels in gasoline.

The December contract settled 0.65 cent a pound, or 0.64%, higher at 101.45c, and February was up 0.52c, or 0.50%, at 105.02c. January feeders were 1.35c, or 1.16%, higher at 117.40c, and March was up 0.75c, or 0.64%, at 117.65c.

The Environmental Protection Agency is expected to delay its decision on whether to allow the gasoline blend E15 to be used in vehicles made from 2001 through 2006, according to an industry source. E15 -- which uses 15% ethanol and therefore more corn than regular gasoline -- is already approved for vehicles made since 2007. Approval for use in the older vehicles could raise demand for the grain which is also used in cattle feed.

The delay eased fears of extra competition for corn, which took prices lower, said Mike Zuzolo, broker with Global Commodity Analytics. The lower corn prices rallied feeder cattle because the lower feed-cost projections increase demand for the young cattle that haven't yet been fattened.

The spike in feeder cattle prices supported live cattle futures prices, Zuzolo said. Many traders were afraid of higher feed costs, and the E15 news eased those fears, he said.

Matt Hartwig, communications director for the Renewable Fuels Association, said the U.S. used about 3.98 billion bushels of corn in 2009 to make 10.75 billion gallons of ethanol.

Earlier in the trading session, CME cattle had been tugged back and forth as investors struggled to weigh economic news out of China and Europe and the reaction in equities markets.

Support came from traders who saw China's benign decline in stock values as a positive after the central bank announced an increase in the reserve requirements for the nation's banks. Brokers said these traders felt the move was necessary in China and that the lack of significant declines in stock prices could be supportive to markets in general.

Sellers looked at Europe where expectations over a possible bailout for Ireland's banks subsided early. Optimism recovered, however, and strengthened the euro against the U.S. dollar, which may have contributed to the late strength in commodities investment decisions.

Feeder cattle settled higher as lower corn prices eased the spectre of high feed costs, brokers said.

-By Lester Aldrich, Dow Jones Newswires; 913-322-5179; lester.aldrich@dowjones.com