U.S. feeder cattle futures surged to a record high at the Chicago Mercantile Exchange on Thursday in reaction to ideas larger-than-expected corn supplies will reduce feed costs and increase demand by feedlots.

Most actively traded March feeder cattle futures feeder cattle hit a high of 152.30 cents per lb, surpassing the previous peak of 152.10 cents set on Jan.5.

The rise was fueled by Chicago Board of Trade corn futures tumbling the daily trading limit of 40 cents per bushel after the U.S. Department of Agriculture's U.S. corn ending stocks data surpassed trade expectations.

The 6-percent slump in corn futures sparked expectations for a decline in feed costs, which should have feedlots paying higher prices for feeder cattle, which are in tight supply.

"The knee-jerk reaction to the big break in corn is that it lowers their (feeders) input costs, and we're not going to create feeders out of thin air," said a principal with PNM Trading Pete Adams referring to scarce number of feeder cattle as a result of the year-long drought in the southwestern United States.

"So, we're still limited on the number of cattle coming up in the next several months, including March feeders," he said.

Meanwhile, benchmark Chicago Mercantile Exchange live cattle futures were firm, while deferred contracts lagged, amid views that less-expensive corn may cause cattlemen to feed cattle to heavier weights and to feed more of them.

"Spreaders were falling all over themselves trying to get out of those back months. They headed to February and April live cattle as they looked to price in at least a steady cash trade around $121 to $122," a CME cattle trader said.

HOGS SURGE AS SHORTS COVER, FUNDS BUY

Hog futures were higher on short covering, fund buying and by spreaders who "bailed" out of deferred contracts after corn prices collapsed, said analysts and traders.

"It's beyond me why we're up, even after cash prices came in lower. Maybe some guys bailed out of those back spreads because of the grain side and February is still at a discount to cash," a CME hog trader said.

The benchmark February contract is 1.175 cents higher at 84.075 cents at 84.075 cents.

(Reporting by Theopolis Waters; Editing by Bob Burgdorfer) (theopolis.waters@thomsonreuters.com; +1 312-408-8725))