U.S. cattle futures surged Thursday, settling at the limit on one-day price increases as cash market trading came in higher than expected.

The jump is a reflection of strong packer margins and could be a sign that retailers are gearing up for a strong July Fourth holiday, analysts said.

Live-cattle futures for August delivery, the most-actively traded contract, rose 3 cents, or 2.9%, to $1.0785 a pound at the Chicago Mercantile Exchange, hitting a nearly one-month high. The June and October futures contracts settled at the exchange limit of 3 cents as well.

Fueling the surge was cattle trading Thursday in the Texas Panhandle and Kansas at $1.08 a pound with some deals at $1.09 a pound, up from last week's prices of mostly $1.05 a pound on a live basis. Beef packers had been resisting the higher levels most of the week, and some may have been short supplies as they maintain strong slaughter rates to take advantage of wide margins, analysts said.

There was "conjecture" that a major packer was short on supplies, said Scot Miller, head of Scot A. Miller & Associates in Montana.

Expectations of strong cash bids fueled the market in early trading, and confirmation of those bids pushed futures prices to their daily limit.

Providing further support for futures contracts was short-covering by traders, as they bought contracts to close out positions to reduce risk, said Sterling Smith, an analyst with Country Hedging.

The higher cash bids could reflect retailer expectations for the July Fourth holiday. Retailers have been buying hand-to-mouth in recent weeks after struggling to sell beef at record-high prices, said Don Roose, president of U.S. Commodities in Des Moines, Iowa.

Once retailers conclude that July Fourth sales will be strong, "then you have everybody scramble" to secure supplies, Roose said.

Stabilizing outside markets, including equities, also added support, as fears about the economy and consumer demand eased, analysts said.

In other cash sales, Nebraska, live sales were reported from $1.10 to $1.12 a pound and dressed at mostly $1.78 with a few up to $1.80, up 3 to 4 cents from the majority of sales last week.

The U.S. Department of Agriculture's midday beef price quote for choice grade carcasses was up $0.37 per hundred pounds at $172.31 and select up $1.06 at $167.07 on 194 total loads.

The latest HedgersEdge packer margin index was plus $46.20 a head, compared with $55.25 the previous day. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.