* Feeder cattle futures extend losses
* Mixed CME hog futures settlement
By Theopolis Waters
CHICAGO, Aug 1 (Reuters) - Chicago Mercantile Exchange live cattle futures settled lower on Friday, partly pressured by residual profit-taking and fund liquidation after Thursday's deep losses, traders said.
However, futures closed off morning lows following initial reports of a less-than-expected decline in the price for market-ready, or cash, cattle.
"Judging by big futures losses on Thursday and today, I thought we'd take $2 to $3 off cash," a trader said.
Investors await returns for unsold cattle after those in Kansas and Nebraska fetched $163 per hundredweight (cwt), mostly $1 lower than last week in both states.
While some packers needed supplies for next week's production, others purchased cattle for delivery as far ahead as early September, a feedlot source said.
Sell stops and fund selling hastened early-session live cattle losses. But, futures' price discount to cash returns at times cushioned the fall.
Traders are monitoring beef cutout prices for signs of demand topping out.
Friday afternoon's choice wholesale beef price, or cutout, slipped 53 cents per lb from Thursday to $263.13. Select beef slid $2.48 to $258.12, the U.S. Department of Agriculture said.
Cattle slaughters are below a year ago, but the sizable increase in cattle weights is adding tonnage on the back end, said West Oak Commodities analyst Tom Tippens.
Consumers may push back against high-priced beef as pork prices move lower, traders said.
August live cattle closed down 0.625 cent per lb to 157.300, and October was 1.325 lower at 156.000 cents per lb.
CME feeder cattle felt pressure from profit-taking and selling in the live cattle market.
August finished down 0.400 cent per lb to 220.275, and September 1.300 lower at 219.900 cents per lb.
CME hogs settled mixed after a choppy session.
August finished unchanged at 118.025 cents per lb, October closed 0.350 cent per lb lower at 102.825 cents, and December was up 0.225 cent at 94.400 cents.
August futures drew support from its discount to CME's hog index at 126.83 cents.
Eroding prices for slaughter-ready hogs and pork at wholesale limited August advances and pressured October futures.
The Friday afternoon average price of hogs in Iowa/Minnesota sagged $1.62 per cwt from Thursday, to $119.56, based on USDA data.
Government data showed the afternoon's wholesale pork price at $127.32 per cwt, down $1.71 from Thursday.
An unexpected surplus of heavy-weight hogs has pulled down cash prices and led to increased pork tonnage, traders and analysts said.
Investors sold October futures and simultaneously bought back months with the view that the pig virus that killed millions of pigs since last year will mainly hurt production beginning this fall. (Editing by Jonathan Oatis)