By Theopolis Waters CHICAGO, Oct 8 (Reuters) - Chicago Mercantile Exchange feeder cattle futures on Tuesday hit the highest level ever at 164.950 cents per lb, driven by cheaper feed that could encourage feedlots to buy young cattle. Chicago Board of Trade corn for December delivery settled down 7-1/2 cents at $4.41-3/4 a bushel after reports of better-than-expected yields from the ongoing harvest in the U.S. Midwest. Firm CME live cattle and steady-to-higher prices for feeder cattle in local markets contributed to the advance in futures, traders said. October feeder cattle ended 0.800 cent per lb higher at 164.800 cents. It spiked to a contract high of 164.950 cents in electronic trading earlier in the session. November settled at 166.325 cents, up 0.850 cent. LIVE CATTLE UP WITH CASH HOPES CME live cattle finished moderately higher as investors bought October and sold deferred months in anticipation of steady-to-higher cash prices this week, traders and analysts said. They cited the seasonal improvement in wholesale beef demand and fewer cattle available for sale as supportive cash cattle influences. October closed up 0.400 cent per lb at 128.275 cents while December finished at 132.325 cents, up 0.025 cent. Last week, cash-basis cattle in the U.S. Plains traded at $125 to $126 per hundredweight (cwt). Tuesday's wholesale choice beef price, or cutout, was up 26 cents per cwt from Monday to $192.59. The select price gained 37 cents to $177.80, according to analytical market research firm Urner Barry. Some packers have curtailed slaughter to strengthen their weak margins and lift wholesale beef values. Urner Barry estimated Tuesday's cattle slaughter at 122,000 head of cattle, 1,000 less than last week and 5,000 fewer than a year ago. The prospect that more affordable feed could increase cattle production pressured deep-deferred live cattle contracts. TWO-TIERED HOG TRADE ON SPREADS Some traders sold CME hog spot October futures and bought deferred months amid uneasiness about how that contract will settle when it expires on Oct. 14. The CME Group Inc on Monday detailed how it will determine the final settlement price for the October 2013 lean hog contract next week if the U.S. government shutdown continues. Spot October also felt pressure from increased hog supplies which could drag down cash prices and wholesale pork values. And speculative traders bought the December contract with the view that the USDA's recent quarterly hogs report did not factor in losses from the Porcine Epidemic Diarrhea virus (PEDv), which is deadly to baby pigs. Spot October finished at 91.225 cents per lb, down 0.375 cent. December closed up 0.325 cent at 88.200 cents.