LIVESTOCK-CME cattle futures set four-week lows as cash prices drop

By Tom Polansek

Feb 6 (Reuters) - Chicago Mercantile Exchange live cattle and feeder cattle futures sank to their lowest levels in four weeks on Thursday as weaker cash prices signaled reduced demand for the livestock, traders said.

Lean hog futures ended slightly higher.

Cash prices for cattle fell, dragging down futures, after both recently climbed to record highs because U.S. inventories have dwindled to their lowest levels in decades, traders said. Commodity funds had helped fuel recent rallies by establishing long positions, or bets that prices will rise, they said.

"Cattle got way ahead of themselves and they needed to correct," said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage.

"You had everybody and their brother long cattle."

Most-active CME April live cattle futures LCJ25 fell 4.525 cents to end at 196.775 cents per pound, while March feeder cattle FCH25 slid 5.425 cents to 265.3 cents per pound. Both contracts hit their lowest prices since January 8.

Tight cattle supplies have increased beef prices for consumers and forced processors, such as Tyson Foods TSN.N, to pay more for animals to slaughter.

Meatpackers were losing more than $200 for each head of cattle they slaughtered for beef on Thursday, compared to losses of about $132 per head a week ago, livestock marketing advisory service HedgersEdge.com estimated.

Processors reduced the number of cattle they slaughtered to an estimated 118,000 cattle from 122,000 cattle a week ago, according to U.S. Department of Agriculture data.

The USDA separately reported that choice boxed beef cutout values fell.

"If it wasn't bad news, cattle would have no news today," said Brian Hoops, president of brokerage Midwest Market Solutions.

Concerns have eased among traders about the risk for tariff disputes with Canada and Mexico to disrupt the flow of livestock into the United States. U.S. President Donald Trump on Monday postponed plans for tariffs on Mexico and Canada for a month.

The USDA over the weekend also said it would resume cattle imports from Mexico that the agency had blocked since late November due to the discovery of a pest south of the border.

In CME's hog market, April futures LHJ25 rose 0.2 cent to 91.750 cents per pound.

(Reporting by Tom Polansek; Editing by Alan Barona)

((Thomas.Polansek@thomsonreuters.com))