CME offers lean hog futures contracts on the Globex trading platform, which can be traded electronically through Schwab. Trading lean hog futures requires a futures account that has been approved.
How do I get started investing in hog futures?
Pigs can be purchased in two ways: as a lean hog futures contract (which is a contract for the hog’s carcass) or as pork bellies (traders’ slang for “bacon”).
Is there a hog ETF?
In the US ETF market, HOG owns roughly 17.2 million shares. With about 4.30 million shares, the iShares Core S&P Mid-Cap ETF (IJH) is the largest ETF holding HOG. The Future Fund Active ETF (FFND) has the greatest exposure to HOG stock, with a portfolio weight of 3.95 percent, which may be of interest to investors.
How do hogs get traded?
Through the equities market, there is no adequate way to get pure-play exposure to lean hog prices. The majority of lean hog farms are privately held or part of larger public enterprises that do other things.
Traders seeking exposure should go to ETFs that invest in futures rather than stocks.
Contracts for Difference (CFDs)
The use of a contract for difference (CFD) derivative instrument is a common approach to trade lean pigs. Traders can bet on the price of lean hogs using CFDs instead of holding the underlying commodities. The difference between the price of lean hogs at the time of purchase and the current price is the value of a CFD.
CFDs on lean hogs are available from a number of regulated brokers throughout the world. Customers make a deposit with the broker to serve as margin. CFDs offer traders the ability to gain exposure to lean hog pricing without having to buy shares, ETFs, futures, or options.
So, what exactly are hog futures?
Derrell Peel of Oklahoma State University and Ronald Plain of the University of Missouri served as reviewers.
If a pig producer is unfamiliar with futures markets and hedging, he or she may have a lot of questions about how to use this pricing instrument. But the most fundamental question is why would you want to learn about futures markets? To put it another way, why do manufacturers hedge? To respond to this question, you must first define futures markets and hedging. A hog futures market determines the price of hogs that will not be delivered until a later date. Hedging is when a producer utilizes the futures market to forward-price pigs before delivery. Forward-pricing pigs is done for two reasons. For starters, the producer might believe that current futures market prices are greater than cash prices when the hogs are ready to be delivered. Second, even if cash prices are greater at delivery time, a manufacturer may be unable or unwilling to take the risks of prices lower than the present futures price.
What factors influence the price of lean hogs?
The vast global pork industry is intimately tied to the usage of lean animals to speculate on pork prices. Pork is consumed by more people throughout the world than any other animal protein.
Pork consumption reaches 100 million metric tons per year worldwide, spanning varied geographies, economics, and cultures.
Lean hog prices have typically been linked to livestock feed prices and weather patterns. Price fluctuations are also influenced by increased demand from China and competition from other animal products.
Is there an ETF for livestock?
Agricultural commodities exchange-traded funds (ETFs) are funds that invest in firms that produce agricultural products like grains, dairy, and animals. These funds might invest in a variety of commodities or concentrate on a single one.
Is there a link between soybean hogs and corn production?
The majority of hog finishing feeds contain 70 to 85 percent corn and 8 to 23 percent soybean meal. The hog feeder would require 810,000 pounds of corn (14,464 bushels) and 194,400 pounds (97.2 short tons) of soybean meal if the feed ration was 75 percent maize and 18 percent soybean meal.
What is the lean hog index at the CME?
The Pork Cutout Index was created by CME Group to provide another tool for controlling the price risk connected with hogs and pork production. While the Lean Hog Index measures hog prices in the United States, the Pork Cutout Index reflects pork pricing.
Why do people choose to eat hogs?
Because of the volatility of hog prices, lean hog futures are important hedging vehicles for the pork business. Speculative holdings are common while trading in these futures. The term “lean hog” refers to pork that is traded on the Chicago Mercantile Exchange’s options and futures exchanges (CME).