UPDATE 1-LIVESTOCK-US cattle futures gain, hog futures firm

* Fiscal crisis jitters restrain trade

* Hog futures firm on discount to cash

* Texas cattle trade lightly at $126 per cwt

(Adds prices, details supporting price rise, Texas feedlot trades)

CHICAGO, Nov 16 (Reuters) - U.S. cattle futures rose on Friday over improved optimism that lawmakers would work through budget differences and traders awaited the U.S. Department of Agriculture's October cattle-on-feed report.

Livestock futures also have been finding support from declining Chicago (CBOT) corn and soymeal, which will lower feed costs. Corn turned firm late on Friday but is still down nearly 15 percent from the record $8.49 per bushel set in August. Soymeal is down more than 20 percent from the record $541.80 per ton set in early September.

``We're seeing a lot of positioning before the cattle-on-feed report, and the break in grains is supportive as well,'' said Dax Wedemeyer, analyst for U.S. Commodities, Des Moines, Iowa.

Traders said livestock futures turned higher after equities recovered after news from Washington that the United States may be able to avert automatic tax hikes and spending cuts in January that could send the country back into recession.

Chicago Mercantile Exchange (CME) December cattle were up 0.550 cent per lb at 126.150 cents per lb and February was up 0.650 at 130.025.

Feeder cattle for January delivery were up 0.450 at 145.600, and March feeders were up 0.525 at 148.125.

Corn prices rose in late dealings on Friday but overall, the decline in price of the chief feedgrain has helped lift feeder cattle and also led to a reversal of bear spreads in live cattle futures, which buoyed the nearby December contract relative to the deferred months.

Livestock analysts were expecting the USDA cattle report for October to show the lowest number of young cattle placed in the nation's feedlots in 16 years, and the number on feed at the end of October down more than 5 percent from a year ago.

Poor profits, due in part to high feed costs, have been trimming the number of cattle placed on feed for five months in a row, and the nation's cattle herd has shrunk to the smallest in 60 years.

Traders said the CME December cattle contract was pricing in cash cattle at the $125 per cwt level, and that price appeared to be the benchmark ahead of the weekend.

However, additional support to cattle futures came from news feedlot sources late on Friday said fed cattle in Texas traded lightly at $126 per cwt, steady with last week.

Updated beef export data were bearish for cattle futures. The USDA on Friday reported last week's U.S. beef exports down 42 percent from the previous week and down 30 percent from the prior four-week average. Exports were the lowest since the week of Sept. 27.

Lean hog futures were mixed, with nearby months firm on the lower corn prices and on the discount of December hog futures to cash. Demand was restrained since packing plants will be closed during the Nov. 22 Thanksgiving Day holiday, limiting packer needs for supplies.

Traders and analysts also said activity in hog futures was being somewhat restrained by the possibility of a fiscal crisis.

Wedemeyer said there ``is some wait-and-see'' and ``if nothing is done, it will be bearish for all commodities.''

CME December lean hogs were up 0.250 cent per lb at 80.325 cents per lb, and February was up 0.300 at 86.450.

(Reporting by Sam Nelson and Theopolis Waters; Editing by John Wallace and Grant McCool)