By Kelsey Gee 
 

CHICAGO--A brighter-than-expected outlook for U.S. cattle supplies sent futures to the highest close in three weeks on Monday, as prices rallied by the exchange-imposed daily limit.

August live-cattle futures surged 3 cents, or 2.7%, to $1.1295 a pound on the Chicago Mercantile Exchange, after hitting a five-year low last week. Cattle futures for October also rose 3 cents, or 2.8%, to $1.11075 a pound. Feeder-cattle futures for August picked up 4.5 cents to $1.4170 a pound, after sliding 1.7% over the past week.

Concerns about sluggish demand for livestock and beef dragged U.S. live-cattle futures to the lowest levels in five years last week, as consumers typically opt for lighter fare during the hottest weeks of the year, giving meatpackers little incentive to bid aggressively for cattle.

However, traders on Monday focused on a U.S. Department of Agriculture report that Friday afternoon forecast a much smaller increase in supplies this fall than previously feared.

In June, just 1.525 million cattle entered U.S. feedlots, up 3% compared with this time in 2015. Analysts surveyed by The Wall Street Journal forecast, on average, a 6.5% rise from 2015 levels, with estimates ranging from 3.8% to 9.9% above the year-ago period.

The agency also estimated that feedyard operators sold 9% more cattle to meatpackers in June than they did last year at this time, the most aggressive pace of marketings since 2012, which has reduced the overall supply of cattle being fattened for beef.

The data show that "feedlot inventories are growing only slowly" said Derrell Peel, livestock economist at Oklahoma State University, in a research note, which has provided some relief for producers who have watched prices fall nearly 20% this year in anticipation of the supply bulge.

The hog market also advanced, lifted by gains across the livestock markets.

Hog futures for August rose 0.4 cent to 75.675 cents a pound, after sliding 5.9% last week. October hog futures advanced 0.45 cent to 64.35 cents a pound.

Write to Kelsey Gee at kelsey.gee@wsj.com

(END) Dow Jones Newswires

July 25, 2016 15:25 ET (19:25 GMT)