Cattle Futures Drop Limit

Despite reassurances from the government, futures traders showed again Thursday that they think the Agriculture Department’s whole-herd dairy buy-out program is going to glut the market with red meat.

Cattle futures prices plunged the limit 1 1/2 cents a pound allowed for daily trading on the Chicago Mercantile Exchange. It was the third session this week in which prices hit bottom. Live cattle, feeders and pork bellies hit contract lows.

The Agriculture Department announced March 29 that it will buy 1.55 million head of dairy cattle to reduce milk production, about a half million more than the market had expected.

About 65% of the animals will be bought for slaughter during the first five months of the 18-month program.

In an attempt to calm fears about oversupply, a senior Agriculture Department official said Wednesday that the buy-out is not expected to add significantly to the supply of beef. And Agriculture Secretary Richard Lyng said Thursday in Nebraska that the market had “overreacted” to the program.

At the very time Lyng was talking, however, the market was collapsing again.