CHICAGO, March 27 (Reuters) - Chicago Mercantile Exchange cattle futures rose on Wednesday in a recovery from two-month lows reached a day earlier.

Cattle futures had dropped this week on fund selling, combined with larger-than-expected U.S. feedlot placements in February and concerns over detections of avian flu in U.S. dairy herds.

"The selling exhausted itself," said Matt Wiegand, commodity broker for risk management firm FuturesOne.

CME May feeder cattle finished 1.025 cents higher at 248.275 cents per pound, while June live cattle ended 0.300 cent higher at 178.675 cents. Both contracts bounced after falling to their lowest prices since Jan. 25 on Tuesday.

Findings of avian flu in dairy herds and milk, confirmed after trading ended on Monday, had spooked the markets, traders said. Some traders worried that importers could restrict shipments of U.S. beef because of the detections, as importers have limited purchases of U.S. poultry after infections in chicken and turkey flocks.

The U.S. Department of Agriculture told Reuters on Wednesday it works closely with importers to mitigate "unnecessary" trade impacts.

"We cannot predict the actions other nations will take upon learning of this new detection, but our robust animal health infrastructure and the trust we have garnered worldwide will help keep as many products as possible in trade," the agency said.

The USDA early on Thursday is slated to report U.S. export sales data for farm products including beef and pork for the week ended March 21.

Later on Thursday, the USDA is due to issue a quarterly hog report that analysts expect will show the U.S. pig herd on March 1 was about the same size as it was a year earlier at around 74.136 million head.

Benchmark CME June lean hog futures on Wednesday closed 0.250 cent firmer at 101.600 cents per pound. (Reporting by Tom Polansek; Editing by Krishna Chandra Eluri)