U.S. livestock futures closed higher on Tuesday, extending their recent rally due to signs of firm demand for beef and pork.

Live cattle futures opened the week higher after prices for cattle in cash markets exceeded expectations once trading finally took place late Friday.

Cattle for February delivery rose 1.05 cents, or 0.9%, to $1.2352 a pound in trading at the Chicago Mercantile Exchange. April cattle traded higher by 0.4 cent, or 0.3%, to $1.2680 a pound.

January feeder cattle futures closed at a fresh all-time high after they rose 0.1% to $1.5065 a pound. Feeder cattle futures have been soaring to record territory due to a combination of easing corn prices and signs that cattle supplies are tightening this year more quickly than expected. Analysts generally expect cattle supplies to tighten in 2012 after a drought in the southern plains last year caused ranchers to deplete herds, leaving them with a smaller pipeline of supplies for quarters to come.

The higher prices in cash cattle markets surprised some participants because they contradicted other weaker signs of demand, including softness in wholesale beef prices and negative profit margin estimates for packers. The higher cash prices also presented a challenge for investors who'd made bets that cattle prices would fall in the near term before rising this spring.

"I sense a certain amount of short covering from disappointed bears who thought we'd see a lower cash trade this week," said Kent Beadle of brokerage Russell Consulting Group.

The U.S. Department of Agriculture reported midday choice boxed beef prices up 21 cents a hundred pounds at $183.92 and select off 73 cents to $174.34 a hundred pounds. Total sales were reported at 122 loads.

The latest HedgersEdge packer margin index was minus $78.20 per head, compared with minus $75.15 the previous day. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.

Outside markets added support for both cattle and hog contracts as investors were cheered by encouraging economic data out of Europe and the U.S. The Dow Jones Industrial Index was recently up 68 points to 12490. Bellwether crude was up 2% to $100.71 a barrel.

Cash cattle bids have not been established yet and may not be available until Wednesday. Meanwhile, cattle feeders in Texas and Kansas are pricing their animals at $1.25 a pound, up 2 cents from where cattle sold last week in the region.

Smaller show lists this week and gains in live cattle futures prices today encouraged owners to seek higher prices. Trading will likely not develop until Thursday or Friday.

Packer margins are deeply negative and may cause processors to trim their slaughter schedules this week. Some predict the week's total will be under 640,000 head, compared with 653,000 a week ago.

Sales in Nebraska last week were at mostly $1.98 a pound on a dressed basis with a few up to $2.00 a pound, steady to up 2 cents from the previous week. Live sales prices there were at mostly $1.24 a pound, up 2 to 3 cents from a week earlier.