* Lower cash feeder cattle, live cattle selloff weigh * Live cattle futures drop on fund selling, cash values * Feb hogs gain; others fall with lower cash, corn prices By Theopolis Waters CHICAGO, Feb 12 (Reuters) - Chicago Mercantile Exchange feeder cattle futures slumped on Tuesday, weighed by lower prices for feeder cattle in the most-watched Oklahoma City cash market, analysts and traders said. They also cited active early-session selling in the neighboring CME live cattle futures market. Feedlots are beginning to feel the impact of significant losses after overpaying for younger cattle that are in short supply, Doane Advisory Services economist Dan Vaught said. The U.S. cattle herd shrunk to the smallest in 61 years after prolonged drought pushed feed costs to record highs last summer. Still, feeder cattle futures recovered some of their losses as live cattle contracts floated up from morning lows. March and April feeder cattle attracted buyers after both trading months sank to fresh contract lows of 141.800 and 145.625 cents, respectively. CME feeder cattle for March ended 1.550 cents per lb lower at 143.250 cents. April closed at 147.150 cents, down 1.475 cents. LIVE CATTLE SAG ON CASH PRICES Live cattle futures finished lower on fund liquidation and disappointing early-week cash cattle returns, traders and analysts said. A small number of cattle in the southern U.S. Plains traded at $123 per cwt, down $2 from last week, feedlot sources said. Sellers priced unsold cattle in the Plains from $125 to $127, they said. "Cash prices have been pressuring the live cattle market. And the inability of the cutout to gain consistent traction is very disconcerting to the futures trader," Jim Robb, director of the Livestock Marketing Information Center, said. Continued poor margins and seasonally tepid wholesale beef demand are limiting how much packers are willing to spend for supplies. But bullish investors are betting that a decline in the number of animals available for sale this week will mean cattle left in feedlots fetch at least $125. The U.S. Department of Agriculture showed the price for wholesale choice beef, or cutout, on Tuesday morning at $183.44 per cwt, up 72 cents from Monday; select cuts rose 52 cents to $179.67. HedgersEdge.com put the average beef packer margin for Tuesday at a negative $78.50 per head, compared with a negative $75.95 on Monday and a negative $69.70 on Feb. 5. Spot February settled 0.825 cent per lb lower at 126.050 cents. The most-active April ended down 0.400 cent at 129.950 cents. MOST HOGS FALL ON CASH Spot February CME hog futures closed up 0.350 cent per lb at 87.250 cents, drawing support from their discount to CME's lean hog index at 90.17 cents. Other contracts retreated as packers lowered bids for cash hogs to offset damage to their unprofitable margins, a trader said. Deferred-month hog futures' premiums came into question as corn prices continued to trend lower. That could slow the pace of liquidation of the hog herd and later pressure cash prices. Most-active April ended at 86.000 cents, 0.375 cent lower and June closed 0.525 cent down at 94.250 cents. The average hog price at the most-watched Iowa/Minnesota market on Tuesday morning was $81.52 per cwt, $1.45 lower than on Monday, the USDA said. The average pork packer margin for Tuesday was a negative $12.55 per head, compared with a negative $13.70 on Monday and a negative $5.50 on Feb. 5, according to HedgersEdge.com.