A rush of commodity fund business and strong market opinions have pushed live cattle futures' open interest to the highest level in 21 months.

Open interest, the total of investor and hedger long and short positions held in the market, hit a recent low of 64,660 contracts Aug. 19 and was at 69,163 Jan. 3 before surging to 97,619 on Feb. 6.A similar surge in open interest was seen in 1990, when total open interest went from 79,976 contracts Jan. 2 to a record 113,070 by Feb. 13.

Most analysts judge a market's liquidity by the total of open interest. About 50 percent of the recent expansion in open interest in the live cattle futures market is attributable to increased commodity fund business, and the other 50 percent comes from traders with strong opinions willing to take a stand on the market, one veteran trader said.

A flood of money has poured into commodity funds in the past five years. In 1987, $5 billion was under fund management in the United States, but by the end of 1991 that figure had swelled to $20 billion.

By the end of the decade, total money under fund management could exceed $100 billion, said Tim Hughes, commodity trading adviser for Insight Enterprises.

Insight Enterprises reflects that expansion in commodity fund trading. When the company was formed in 1987, it managed $400,000; the firm now manages $62 million.

That flow of money moving to commodity fund managers has been magnified in 1992 as people reroute money from low-return investments, such as certificates of deposit, where yields have declined with lower interest rates.

Not all money managers agree that commodity funds have benefited by the exit from certificates of deposit.

Some managers think commodity fund accounts are too risky to attract the low-risk investors who used CDs and that those investors have turned to the stock market or other lower-risk ventures in hopes of higher returns.

Although most of the CD money may have moved into stocks, the lower interest rates have had a positive effect on investment in fund trading as investors realize that the potential for much higher returns offsets the higher risk, Mr. Hughes said.

Fund trading has been furthered by studies showing that a balanced portfolio should include commodity fund trading, said David Cheval, executive vice president of EMC Capital Management, one of the most successful fund groups.

EMC has a five-year average return of 75 percent and manages about $100 million, Mr. Cheval said.

Recently, managers with large portfolios, such as the Commonwealth of Virginia, have begun dedicating part of their portfolio to fund traders as a way of diversifying, Mr. Hughes said.

Selection of fund managers also has been diversifying. Traditionally, most commodity fund traders have been technical traders who enter and leave markets based on charting tools, such as moving averages.

However, commodity pool operators - the people who raise money for fund accounts - have been actively recruiting fund managers who trade on fundamentals as a way to vary fund investments, Mr. Hughes said.