Chicago Mercantile Exchange (CME) cattle futures fell sharply on Wednesday after the US government announced plans to expand testing of dairy cows for avian influenza - even though the virus has not been identified in beef cattle herds, Reuters reported, citing market analysts.

So far, dairy cattle in eight states have tested positive over the past month, along with one dairy worker in Texas. It is not know exactly how the virus moved around.

Still, cattle futures have felt the ripple effects as news of the virus in dairy cow herds has grown, market analysts said, and investor are becoming concerned that consumer demand for dairy and beef products could chill prior to the busy grilling season.

All dairy cattle moving between states will be required to be tested for bird flu starting Monday, US Department of Agriculture Secretary Tom Vilsack said, as federal officials ramp up their response to an outbreak in herds.

After Monday's news broke, the CME's benchmark June live cattle futures contract fell below its 20-day moving average and hit its lowest level since Friday, before paring losses slightly.

The June contract was down about 1% on the day as of 12:37 p.m. CDT/1737 GMT.

"This story is just not going away, it's evolving," said Ross Baldwin, who owns about 5,000 head of beef cattle and is a livestock analyst with John Stewart & Associates in Anthon, Iowa. "The risk we have going forward: What's the next headline?"

Meanwhile, CME lean hogs ended the day mixed, pressured by weakness in the cattle markets and on some signs of profit-taking, traders said. CME June lean hogs LHM24 settled down 0.500-cent at 107.450 cents per pound.

Actively traded CME June live cattle settled down 1.900 cents at 175.250 cents per pound. Most-active CME August feeder cattle settled down 3.100 cents at 256.300 cents.