COMMODITIES : Cattle Futures Dive as Beef Demand Dips

Some cattle futures prices plunged the 1.50-cent limit allowed for daily trading Thursday, and analysts said the drop was because of slack demand for beef and reports of a packer plant closing.

On other markets, grain and soybean futures retreated, energy futures were down, precious metals were mixed and stock index futures advanced.

Tight supplies of slaughter-ready cattle have driven up the prices asked by producers, but sales of beef have slowed during the Lenten season and packing houses are caught in the middle, analysts said.

Swift Independent Packing said Thursday that it would close its Dumas, Tex., slaughter plant next week, at least temporarily, and traders on the Chicago Mercantile Exchange feared other plants also would close, said Chuck Levitt, an analyst in Chicago for Shearson Lehman Hutton.

A wave of plant closings could lead to a backlog of finished cattle, ultimately forcing cash cattle prices lower, he said.

The selloff was exacerbated by the record-high unfilled buy orders for live cattle going into Thursday’s session, said Tom O’Hare, an analyst in New York for Smith Barney, Harris Upham & Co.

When live cattle for April delivery fell below the key support level of 71.20 cents a pound, traders rushed to offset those open “long” positions with sell orders, accelerating the slide, he said.

“When you have a lot of open interest it has the potential for making the market very volatile,” O’Hare said.

“A lot of people have gotten in in the last couple of weeks, but the movement of beef carcasses and boxed beef has been insufficient to make people continue to be long.”

Hog futures retreated on reports that Japanese inspectors had detected residues of sulfamethazine, a possibly carcinogenic feed additive, in shipments of U.S. pork, analysts said.

Soybean Futures Decline

Live cattle settled 0.80 cent to 1.50 cents lower, with the contract for delivery in April at 70.62 cents a pound; feeder cattle were 1 cent to 1.50 cents lower, with March at 79.07 cents a pound; hogs were 0.02 cent to 0.80 cent lower, with April at 42.45 cents a pound, and frozen pork bellies were unchanged to 0.30 cent lower, with March at 52.25 cents a pound.

The beginning of the South American soybean harvest, coupled with expectations of increased farmer selling of soybeans, created concern that abundant supplies could depress cash prices, analysts said.

The wheat market drifted lower amid nervousness about the Agriculture Department’s new series of surplus wheat auctions, analysts said.

The USDA sold 10 million bushels of surplus wheat on Tuesday. But the agency announced after Thursday’s close that it had sold just 1.4 million of the 10 million bushels it had offered on Wednesday. Another auction today has the potential of putting another 10 million bushels of surplus wheat onto the open market.

Corn prices fell only slightly, with support stemming from speculation that the Soviet Union had purchased more U.S. corn than the USDA has confirmed, said Ted Mao, an analyst for Shearson.

Wheat settled 1.75 cents to 2.75 cents lower, with March at $3.0425 a bushel; corn was 0.25 cent to 1.25 cents lower, with March at $2.0075 a bushel; oats were 2 cents to 7.50 cents lower, with March at $1.86 a bushel, and soybeans were 4.25 cents to 8 cents lower, with March at $6.23 a bushel.

Gold futures followed oil prices lower on New York’s Commodity Exchange, while silver futures moved higher because of silver’s value as an industrial metal, said Bette Raptopoulos, an analyst for Prudential-Bache Securities.

Gold settled $3 to $3.40 lower, with April at $429.10 an ounce. Silver was 4.30 cents to 4.80 cents higher, with March at $6.264 an ounce.

Stock index futures slipped lower on the Chicago Mercantile Exchange, where the contract for March delivery of the Standard & Poor’s 500 index settled 0.10 point higher at 268.45. The underlying spot index lost 0.09 point, closing at 267.89.

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