U.S. live cattle futures rallied to six-month highs Tuesday amid fund-buying against a backdrop of tightening supplies.

CME live cattle for October closed up 1.35 cents, or 1.1%, at $1.271 a pound, the highest closing price for the front month since mid-March. The December contract also hit its highest level since March.

Speculative fund-buying boosted the market, as live cattle's climb to new highs attracted trend-followers, accelerating the gains, brokers said. They said there was no apparent fundamental news Tuesday, but that expectations of a seasonal tightening of supplies are supporting the market generally.

Supplies have tightened as ranchers have sold more of their animals sooner than normal because of a severe drought that has hammered the Plains over the past two years and caused pastures to whither.

The market's rally Tuesday establishes a positive technical trend that could further support prices, said Tom Leffler, head of Leffler Commodities, a Kansas brokerage. But he cautioned that the extent of recent gains could prompt some traders to take profits on long positions. Weakness in the pork complex also limits the market's upside, he said. "If we bring the hogs down, and bring the pork down, that's going to make more competition for beef, and that's not good news."

Feeder cattle ended lower Tuesday despite starting the session stronger. The market retreated even as corn prices fell slightly, which is typically supportive to feeder cattle prices. Traders are awaiting Wednesday's supply and demand report from the U.S. Department of Agriculture, which could alter grain market dynamics.

CME October feeder cattle closed down 0.225 cent, or 0.15%, at $1.4635.

Initial cash cattle bids for the week emerged near midday at $1.22 a pound live basis in Texas and Kansas. Cattle feeders countered packers' bids with asking prices at $1.26 a pound or higher.

High feed costs, large per-head losses incurred at the feedlots, and an outlook for tighter supplies of slaughter-ready cattle the balance of this year and into 2013-14 are encouraging cattle owners to seek higher prices for their animals.

Sales last week in Texas were at mostly $1.24 a pound in light-volume trading. In Kansas, sales were mainly at $1.24 with some up to $1.245 a pound. Live sales from $1.24 to $1.25 a pound occurred in Nebraska, with dressed sales there from $1.91 to $1.92 a pound.

Packers may not purchase additional cattle until Thursday or later since most appear to have enough animals for this week's slaughter schedules.

The USDA's choice grade wholesale beef quote at midday was up $1.12 per hundredweight at $192.44, while select fell 73 cents to $179.95 on sales of 93 loads.

The latest HedgersEdge packer margin index was minus $18.50 per head, compared with minus $7.65 the previous day. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.