* Lower corn prices raise CME feeder cattle * Hog futures drop with wholesale pork values * USDA's quarterly hog report set for Friday By Theopolis Waters CHICAGO, Dec 26 (Reuters) - Chicago Mercantile Exchange live cattle futures closed higher on Thursday on short-covering in an otherwise quiet post-holiday session, traders said. December live cattle futures finished 0.350 cent higher at 132.700 cents per lb, and February gained 0.425 cent at 134.150 cents. Investors await this week's cash cattle sales, knowing packer margins are poor and beef demand has been inconsistent. The sluggish beef demand, which is not expected to improve until the new year, has created a negative tone in the cattle market, said K&S Financials analyst Jack Salzsieder. Cash cattle bids in Texas and Kansas were at $129 per cwt, with no response from sellers, feedlot sources said. Last week, the bulk of cattle in the U.S. Plains moved at $130, they said. Thursday morning's wholesale price for choice beef was up 42 cents per cwt from Tuesday at $197.28, while the select cutout dropped $1.10 to $190.88, USDA said. Beef packer margins for Thursday were estimated at a negative $72.55 per head, compared with a negative $51.00 per head a week ago, according to HedgersEdge.com. Packers have little interest in raising bids for cash cattle with some plants operating at reduced levels during the Christmas and New Year's holidays. Cargill Inc's beef packing plant in Dodge City, Kansas, which was idled by fire on Monday, is expected to return to normal operations as early as Saturday, a company spokesman said in an e-mail. Live cattle futures received an added boost from buying in CME's feeder cattle market. Feeder cattle at the CME moved higher as corn prices declined on worries that demand from China may ease. Lower-cost corn could encourage feedyards to buy young cattle. Feeder cattle for January closed at 166.600 cents per lb, up 0.350 cent, and March finished at 167.200 cents, up 0.550 cent. HOGS SAG ON PORK DEMAND CME hogs, on a continuous lead-month chart basis, landed in negative territory for a fourth straight session, pressured by lower wholesale pork prices, traders and analysts said. The morning's USDA wholesale pork price was down $1.75 per cwt from Tuesday to $84.14, brought down by $4.89 drop in pork bellies, which are made into bacon, USDA said. "There's a lot of bellies in storage right now. And, bacon demand could stumble as people return from holiday vacations," a trader said. Traders sold February hog futures and bought deferred contracts amid concerns cash hog prices may slip because of plant shutdowns during the New Year's holiday. USDA's morning direct hog prices were unavailable. Hog brokers said cash hogs in the Midwest traded steady, underpinned by sufficient demand from packers. Investors adjusted positions ahead of Friday's USDA's quarterly hog report. Analysts expect that report to show the U.S. hog herd declined due in part to a swine virus that is fatal to baby pigs. Such a decline should shrink pork production in the first half of 2014. February hogs closed 0.575 cent per lb lower at 85.300 cents, and April ended down 0.400 at 90.650 cents.