LIVESTOCK-Live cattle slip 1 pct amid economic woes

By K.T. Arasu

CHICAGO, July 2 (Reuters) - U.S. live cattle futures fell 1 percent on Thursday as the recession and high unemployment continued to weigh on demand for beef, with analysts expecting fewer steaks on backyard grills this July 4th holiday.

There were also concerns that beef sales could be hurt if China goes through with plans to stop importing U.S. chicken, a move that would boost poultry supplies in the United States, cut their prices and draw consumers away from beef.

"There are concerns about China stopping imports of U.S. chicken," said livestock analyst Rich Nelson of Allendale Inc. "It could affect demand for beef."

The USA Poultry and Egg Export Council said on Tuesday China, the top market for U.S. chicken, was telling American poultry producers that it will stop importing their chicken.

The move was apparently in retaliation to U.S. rules that restrict poultry products from China, a reaction to food safety scandals that have damaged the reputation of Chinese goods.

A Chinese vice minister on Thursday denied China was blocking imports of U.S. chicken.

In April, China launched a formal World Trade Organization dispute, saying U.S. limits on poultry imports from the country violate Washington's international trade commitments.

August live cattle 2LCQ9 settled down 0.875 cent, or 1.02 percent, at 84.875 cents per lb.

Traders said live cattle futures were also weighed down by a rise in the dollar against major currencies [USD/], which would dim export prospects, a 2.5 percent drop in the stock market .DJI and more signs of trouble in the recession-hit economy.

HIGH UNEMPLOYMENT MAY HURT BEEF DEMAND

The U.S. unemployment rate hit a nearly 26-year high of 9.5 percent, with the Labor Department on Thursday reporting the loss of 467,000 jobs -- 100,000 more than Wall Street economists had expected. [ID:nN02549309]

Wholesale beef prices continued to fall. The U.S. Agriculture Department said on Thursday the price of choice grade beef cutout fell 26 cents from Wednesday to $137.93 per cwt, down $1.45 from a week ago.

Traders said about 250 head of fed cattle traded at $83 per cwt in Oklahoma and Kansas, up $1 from last week. But feedlot sources said sellers were holding back for $84 and even $85.

Hog futures ended higher amid expectations for cash markets to strengthen next week and as traders covered their short positions ahead of the three-day July 4th weekend.

Markets will be closed on Friday in observance of the U.S. Independence Day on Saturday.