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* Feeder futures advance as corn retreats * Futures' discount to cash lifts CME hogs By Theopolis Waters CHICAGO, Aug 20 (Reuters) - Chicago Mercantile Exchange live cattle futures gained modestly on Tuesday in anticipation of higher cash prices this week, traders and analysts said. Spot August live cattle ended up 0.200 cent at 123.850 cents per lb. Most-actively traded October closed up 0.075 cent at 128.150 cents. No cash cattle bids or asking prices were reported by feedlot sources so far this week. Last week, cash cattle in Texas and Kansas moved at $123 per hundredweight (cwt). Live-basis cattle in Nebraska fetched $125. Fewer cattle available for sale could prompt packers to spend more for supplies. And, processors may raise cash bids given their profitable margins and as grocers buy beef to feature during the Sept. 2 U.S. Labor Day holiday. "Most of the meat buying for the last summer grilling day of the year is almost behind us. The market (futures) will lack clear direction until we get into September," Livestock Marketing Information Center director Jim Robb said. On Tuesday afternoon, the U.S. Department of Agriculture reported the wholesale choice beef price at $195.60 per cwt, up 38 cents from Monday. Select cuts dropped $1.33 to $184.32. Spread traders at times bought nearby CME live cattle contracts and sold deferred months with the view that cheaper corn may increase cattle production. Chicago Board of Trade corn for December 2013 delivery fell 10 cents per bushel on the prospect of a big U.S. corn harvest this fall. CME feeder cattle drew support from modest live cattle market advances and lower corn prices. Less-costly corn may ease input costs for feedlot operators. August feeder cattle futures closed at 155.400 cents, 0.500 cent per lb higher and September ended up 0.300 cent at 158.250 cents. HOGS UP ON FUTURES' DISCOUNT TO CASH Nearby CME hogs' discount to the exchange's hog index, which was at 101.77 cents, encouraged buyers, traders said. Futures made headway despite lower cash hog and wholesale pork prices. USDA on Tuesday morning reported the average hog price in the most-watched Iowa/Minnesota market dropped 42 cents per cwt to $93.07. Separate government data Tuesday morning showed the wholesale pork price, or cutout, at $102.46 per cwt, down 82 cents from Monday. Packers are less aggressive about buying hogs while in the midst of a seasonal buildup in supplies. Some producers are sending hogs to market ahead of schedule to avoid potentially lower cash bids with planned plant closures over the three-day Labor Day holiday. And grocers are seen buying less pork as they have all they need heading into Labor Day. October hogs ended at 86.950 cents per lb, 0.475 cent higher. December finished up 0.300 cent at 83.750 cents.