* Fund liquidation drags down CME live cattle * Feeder cattle futures follow live cattle lower By Theopolis Waters CHICAGO, Sept 17 (Reuters) - Chicago Mercantile Exchange hog futures slumped on Tuesday, as investors who expect cash hog prices to top out soon took profits, traders and analysts said. They said packers are reluctant to bid more for cash hogs given unprofitable operating margins and the seasonal increase in supplies. In the morning, the U.S. Department of Agriculture reported the average hog price in the eastern Midwest region at $91.94 per hundredweight (cwt), down 4 cents from Monday. Hog prices elsewhere in the Midwest were unavailable. HedgersEdge.com estimated margins for U.S. pork packers on Tuesday at a negative $2.80 per head, compared with a negative $0.95 on Monday and a positive $6.05 a week ago. Monday and Tuesday's combined estimated hog slaughter was 863,000 head, 16,000 more than for the same period a week ago, according to USDA data. Wholesale pork prices could pullback as supermarkets purchase all the pork they need for the weekend, traders said. U.S. government data showed the wholesale pork price, or cutout, Tuesday morning at $97.66 per cwt, up 95 cents from Monday. CME October hogs finished 1.150 cents per lb lower at 90.975 cents and December ended at 87.525 cents, 0.950 cents lower. CATTLE DROP AS FUNDS SELL CME live cattle futures dropped on fund liquidation that triggered sell stops after contracts slipped below key moving average support levels, traders and analysts said. October closed down 0.375 cent per lb to 125.175 cents. It fought back from session lows after earlier drifting below the 100-day moving average of 125.13 cents. December finished 0.575 cent lower at 128.650 cents. It ended below the 40-day moving average of 128.95 cents. Futures' losses, unprofitable packer margins and tepid wholesale beef demand could keep a lid on cash cattle prices. If grocers are unable to move meat to their customers, those retailers are not going to buy beef from processors, said K&S Financials analyst Jack Salzsieder. A few cash cattle bids surfaced in Texas at $121 per cwt, feedlot sources said. Last week, cash cattle in Texas and Kansas sold at $123 per cwt, and $123.50 in Nebraska. U.S. government data on Tuesday morning showed the wholesale choice beef price, or cutout, at $192.99 per cwt, down 3 cents from Monday. Select cuts were slipped 10 cents to $176.33. Estimated margins for U.S. beef packers on Tuesday were a negative $2.00 per head, compared with a negative $7.70 on Monday and a positive $6.20 a week ago. CME feeder cattle felt pressure from the lower live cattle market and active selling by funds. September ended 1.000 cents per lb lower at 156.600 cents while October settled at 157.875 cents, 1.625 cents lower.