U.S. hog futures fell due to investor caution ahead of Friday afternoon’s quarterly hog report by the the U.S. Agriculture Department, analysts and traders said.

Analysts expect the USDA data, due at 2 p.m. CST, to show the U.S. hog herd declined slightly after a summer that saw historic drought push feed costs to record highs.

Nervousness surrounding budget talks in Washington kept Chicago Mercantile Exchange (CME) livestock market investors on the defensive because of implications for consumer demand for goods, including high-end meat cuts.

"We just need something to happen one way or the other because this uncertainty is killing us," said Country Hedging analyst Tregg Cronin.

CME hogs for February settled 0.65 cent per pound lower at 86.375 cents. April ended at 90.125 cents, 0.825 cent lower (all figures US$).

While some packers raised bids for cash hogs to ensure themselves of supplies after the New Year’s holiday, others pressured cash bids as their margins struggled.

USDA data Friday morning showed the average hog price in the western Midwest market at $81.64 per hundredweight (cwt), up 31 cents from Thursday, but down 68 cents in the eastern region to $79.95.

The average pork packer margin for Friday was a negative $5.70 per head, compared with a negative 90 cents on Thursday and a negative $3.75 on Dec. 21, according to HedgersEdge.com.

Also, packing plants will be closed at least one day during next week’s holiday, reducing their needs for hogs.

Cattle rebound with cash

Live cattle futures rebounded from Thursday’s losses, helped by higher cash cattle prices that stirred short-covering, traders and analysts said.

Cash cattle in Texas and Kansas traded at $127/cwt, up $1 from last week, feedlot sources said. Slaughter-ready sales stalled in Nebraska after a small number of cattle moved at $127 on Thursday, they said.

"You have to be impressed that packers bought cattle at higher prices given their poor margins, lacklustre beef demand and before the holiday-shortened workweek," a trader said.

The price for wholesale choice beef Friday morning was $193.43 per cwt, down 83 cents from Thursday, and select cuts rose 81 cents to $180.30, USDA said.

HedgersEdge.com put the average beef packer margin for Friday at a negative $62.60 per head, compared with a negative $57.55 on Thursday and a negative $53.55 on Dec. 21.

CME live cattle spot December, which will expire from trading on Monday, closed 0.55 cent per pound higher at 129.4 cents. Most-actively traded February ended at 133.575 cents, up 0.525 cent.

Feeder cattle futures rallied with the higher live cattle market and pre-holiday short-covering.

January closed 0.75 cent/lb. higher at 152.025 cents. March was up 0.975 cents to 154.725 cents.

— Theopolis Waters writes for Reuters from Chicago.