* Feeder cattle futures follow lower live cattle
* CME hog contracts rebound on short-covering
By Theopolis Waters
CHICAGO, Aug 13 (Reuters) - Chicago Mercantile Exchange live cattle futures posted losses on Wednesday after packers cut the cost of beef at wholesale markets to stir retail buying ahead of the Labor Day holiday, traders said.
August live cattle ended 1.400 cents per lb lower at 148.225, and October closed down 1.125 cents at 146.550 cents.
Wednesday afternoon's choice wholesale beef price fell to $256.88, down $1.27 per cwt from Tuesday. Select beef tumbled $3.58 to $249.55, the U.S. Department of Agriculture said.
Investors are bracing for potentially lower returns for unsold market-ready or cash cattle based on initial cash price weakness, tepid beef demand and futures' recent retreat.
On Wednesday, a few cash cattle bids in Kansas surfaced at $152 to $153 per cwt, compared to sales of mostly $160 last week, feedlot sources said.
So far this week, a small number of cash cattle in Nebraska fetched $155, down $5 from a week ago, they said.
Prompted by bearish fundamental market indicators, traders sold August live cattle futures and simultaneously bought back months in a trading strategy known as bear spreads.
"August led the way down, which is amazing to me given its discount to cash prices," said R.J. O'Brien floor manager Jim Brooks.
Futures may have already accounted for the bulk of this week's fundamental bearishness, which might lend support to the market on Thursday, a trader said.
CME feeder cattle ended lower, led by live cattle market selling and the pullback in prices for feeder cattle in local markets.
August closed down 0.175 cent per lb at 214.375 cents, and September at 213.550 cents, or 1.100 cents lower.
CME hogs finished higher, supported by short-covering and futures' discounts to the exchange's index at 118.86, traders said.
August, which will expire on Aug. 14, closed up 1.125 cents per lb at 115.200 cents, and October edged up 0.225 cent to end at 97.400 cents.
Deteriorating prices for slaughter-ready, or cash, hogs and struggling wholesale pork values limited back-month futures advances.
The afternoon's average price of hogs in Iowa/Minnesota slid $2.97 per cwt from Tuesday, to $107.46, the USDA said.
Separate government data showed Wednesday afternoon's wholesale pork price at $114.48 per cwt, $2.54 lower than on Tuesday.
Abundant supplies of heavyweight hogs pressured cash prices while increasing pork tonnage, which helped mitigate production losses pegged to the deadly pig virus on U.S. farms.
Investors on Thursday may wait for August futures to expire before figuring out how to trade the October contract, the soon-to-be new lead month, traders said. (Editing by G Crosse)