CHICAGO - U.S. feeder cattle futures rose on Wednesday, hitting a 3 1/2-month high fueled by a shortage of feeder cattle and advances in the live cattle market.

Chicago Mercantile Exchange spot October feeder cattle closed 0.850 cent higher, or 0.58 percent, at 146.950 cents per lb. Most-actively traded November ended at 149.275 cents, 1.550 cents higher or 1.05 percent.

Futures recovered after falling hard last week in response to corn that spiked following the government's crop production report, said A&A Trading broker Jim Clarkson who also cited tight feeder cattle numbers.

CME feeder cattle received extra support from steady-to-higher cash feeder cattle prices at the most-watched Oklahoma City market.

LIVE CATTLE UP AGAIN

CME live cattle rose each day this week as strong wholesale beef demand fueled anticipation for higher cash cattle prices.

Some investors also adjusted positions ahead of the U.S. Department of Agriculture monthly cattle-on-feed report on Friday, Oct. 19.

Analysts expect the data to show a big drop in the number of cattle placed in feedlots during September after the worst drought in more than 50 years sent feed costs to record highs last summer.

Spreaders sold October futures and bought December, lifting it beyond its 100 and 40-day moving averages of 127.12 and 127.60 cents which triggered fund buying.

Spot October closed up 0.575 cent per lb, or 0.46 percent, to 126.125 cents. December ended at 127.600 cents, 0.925 cent higher or 0.73 percent.

"Beef has been on fire which helped packer margins and put cash in a good position to trade higher," said Oak Investment Group president Joe Ocrant.

Isolated cash bids surfaced in the southern Plains at $122 per cwt against $127 to $128 asking prices, said feedlots sources.

The wholesale price for choice beef Wednesday morning was 85 cents per cwt higher at $195.95 compared with Tuesday and select cuts were up 43 cents to $180.98, said USDA.

HedgersEdge.com estimated beef packer margin for Wednesday at negative $17.35 per head, compared with negative $26.65 on Tuesday and negative $33.70 for Oct. 10, according to HedgersEdge.com.