(Update throughout, adds closing prices)

By Jerry Bieszk

CHICAGO (Reuters) - U.S. cattle futures fell 2.1percent on Tuesday when fund liquidation added to pressure frombearish talk of slow beef sales during the three-day holidayweekend.

Hog futures followed as funds liquidated some of their longpositions in commodities amid a higher dollar and lower stockmarket, with spreading pushing the lead October contractsharply lower.

In cattle, traders were disappointed by talk of slow beefsales over the U.S. Labor Day holiday weekend, which isconsidered the last "cookout holiday" of the summer.

"Beef product movement was average at best, with pork andchicken breasts leading the holiday sales parade," AndyGottschalk, an analyst with with HedgersEdge.com, said in amarket report.

Adding to the bearish sentiment was the U.S. AgricultureDepartment on Tuesday afternoon reporting the average choicebeef price at $161.75 per cwt, down 92 cents from Friday andthe lowest since Aug. 19. While the decline was small, analystsand traders said it was evidence of weak holiday beef sales.[BEEF/BOX]

"The bottom line is consumers may not be ready for steaksyet," said Rich Nelson, an analyst with Allendale Inc, whoadded that hot dogs and hamburgers may have been the meatchoice for holiday cookouts.

Funds liquidating huge long positions then pushed futuresdown to new lows late in the session.

More downside is likely for the October cattle contract asthis week marks the beginning of week-long December/Octoberspreading by index funds. The funds will use spreads to movelong positions to the deferred contract.

While cattle and beef markets may be under pressure now,the prices have been well above year-ago levels throughout thesummer due to smaller beef supplies and better sales,particularly beef export sales.

October live cattle <2LCV0> closed down 2.100 cents at96.350 cents per lb and December <2LCZ0> down 1.950 at 98.700.

Feeder cattle futures also posted near three-week lows,pressured by lower live cattle futures and by worries abouthigher corn prices.

Corn markets ended firm on Tuesday and feeder cattletraders remain bearish after corn prices sped higher last week.Higher feed corn prices drive up cattle production costs andmake producers cautious about what they pay for feeder cattle.

Fund liquidation was also evident in feeders.

September feeders <2FCU0> ended down 2.250 cents, or nearly2 percent, at 111.925 cents and more active October <2FCV0> wasdown 2.650, or 2.3 percent, at 112.425 cents.

Hog futures fell along with cattle pits, pressured by lowerpork prices on Friday and by profit taking after last week'sgains in the futures.

Hog futures were up more than 3 percent last week, withtraders encouraged then by a government employment reportshowing an increase in private sector jobs. But fundliquidation over all commodities on Tuesday also hit hogs.

October hogs <2LHV0> closed down 1.600 cents, or about 2.1percent, at 75.600 cents per lb and December <2LHZ0> was off1.100 cents, or about 1.5 percent, at 73.550 cents. (Additional reporting by Bob Burgdorfer; Editing by LisaShumaker)