COMMODITIES : Cattle Futures Surge to Their Daily Limits

Cattle futures soared their permitted daily limits Wednesday on the Chicago Mercantile Exchange as a surge in demand by meat packers pushed cash prices for fattened steers to their highest level in nearly two months.

On other commodity markets, stock index futures plunged, precious metals advanced, grains and soybeans were higher and energy futures were mixed.

Meat packers in western Kansas and Texas paid up to 69 cents a pound for fed cattle, apparently to build up their inventories for an expected upswing in retail beef demand before the Labor Day weekend.

It was the highest price paid for cattle since June 17, when packers bid 70 cents a pound, said Thomas Morgan, president of Sterling Research Corp. of Arlington Heights, Ill.

On the Chicago Mercantile Exchange, the price for August delivery of live cattle settled 1.17 cents higher at 69.42 cents a pound and the October contract gained 1.50 cents, the maximum movement allowed by the exchange.

“What pushed the (futures) market up was the speculation--and speculation is the key word here--that the (cash) market might go to 69.50 or 70,” Morgan said.

But market bears believe that packers now have enough cattle on hand to satisfy the Labor Day demand and will become less aggressive in their bidding, he said.

Pork Bellies Advance

The live cattle rally spread to the neighboring feeder cattle pit, where limit gains were also recorded, and to the pork pits. Most frozen pork belly contracts gained 2 cents a pound, the limit in that market.

Pork bellies also were supported by a Chicago Mercantile Exchange report indicating an upturn in demand for pork bellies, from which bacon is made.

Live cattle settled 0.90 cent to 1.50 cents higher, with August at 69.42 cents a pound; feeder cattle were 0.85 cent to 1.50 cents higher, with August at 81.22 cents a pound; hogs were 0.45 cent to 1.37 cents higher, with August at 45.90 cents a pound, and frozen pork bellies were 0.18 cent to 2 cents higher, with August at 34.80 cents a pound.

Tuesday’s boost in the discount rate, the rate the Federal Reserve charges on short-term loans to member banks, reverberated through financial futures markets Wednesday. The Fed raised the rate half a percentage point to 6.5%.

Treasury bonds for September delivery tumbled 1 points to 84 31/32 on the Chicago Board of Trade, and the contract for September delivery of Standard & Poor’s 500-stock index plunged 5.35 to 262.05 on the Chicago Mercantile Exchange.

Those declines, combined with a weaker dollar and the rise in agricultural commodity prices, spurred buying of precious metals futures, analysts said. Precious metals are considered relatively safe investments in a turbulent economy.

Silver got an additional boost from speculation that a resolution was near in the 3-week-old miners strike in Peru, said Bette Raptopoulos, precious metals analyst in New York with Prudential-Bache Securities Inc.

A scheduled vote today in the House on a proposal for stronger trade sanctions against South Africa gave prices of platinum futures an extra upward shove, Raptopoulos said.

Crop Futures Advance

Platinum for October delivery settled $13.50 higher at $535.80 an ounce on the New York Mercantile Exchange.

On New York’s Commodity Exchange, gold was $1.70 to $1.80 higher, with August at $429.20 an ounce; silver was 8.2 cents to 8.7 cents higher, with September at $6.71 an ounce.

Most crop futures moved higher on the Chicago Board of Trade in light trading amid nervousness about the Agriculture Department’s upcoming crop production report.

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