Lean Hog is a futures contract for hogs (pork) that can be used to hedge and speculate on pork prices.
The Chicago Mercantile Exchange (CME) is where Lean Hog futures and options are traded. Lean Hog futures contracts were first established in 1966. The contracts call for cash settlement based on the CME Lean Hog Index, which is a two-day weighted average of cash markets, and are for 40,000 pounds of Lean Hogs. The contract’s minimum tick size is $0.025 per pound, with each tick worth $10 USD. Price limits of $0.0375 per pound above or below the previous day’s contract settlement price apply to trading on the contract, with the exception that there are no daily price limits in the expiration month contract during the last two Trading Days.
Pork farmers in the United States frequently utilize lean hog futures prices as reference pricing in marketing contracts for selling their hogs. The use of marketing contracts tied to pork futures prices is correlated with the size of the producer and tends to increase. Furthermore, as part of a risk management strategy, hog producers frequently trade pork futures contracts directly.
Both the Bloomberg Commodities Index and the S&P GSCI commodity index, which are widely tracked in financial markets by traders and institutional investors, include Lean Hog futures prices. Because of its prominence in various commodity indices, Lean Hog futures prices have a significant impact on the results of a variety of investment funds and portfolios. Traders and investors, on the other hand, have become important players in the Lean Hog futures market.
As livestock futures contracts, lean hog futures contracts are sometimes lumped in with feeder cattle and live cattle futures contracts. Long feeding times, weather, feed prices, and consumer mood toward meat consumption are all fundamental demand and supply issues shared by these commodities, making grouping them together valuable for commercial talks regarding both the commodities and their futures contracts. This technique has been followed by commodity indices, which have categorized these futures contracts into livestock futures contract groups.
What does it mean to have lean hogs?
The term “lean hog” is a technical term used in the commodities trade of pig products, most commonly through the Chicago Mercantile Exchange. The bulk of edible meat extracted from a hog corpse is referred to as the term. Pork bellies, which are principally utilized in the production of bacon, are exchanged and priced separately. Lean hog futures contracts are widely traded, and delivery dates are tied to the agricultural production cycle.
What is the best way to trade lean hog futures?
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.
Why are the prices of hog futures so high?
Despite a recent drop in grain prices, corn and soybean prices remain at levels not seen in years.
As a result, animal farmers, notably pork producers, are faced with difficult decisions.
The numbers appear to be promising. According to the current Sterling Profit Tracker, farrow to finish farmers are expecting average profits of $94 per head. While it is still in the positive, it has dropped from last week’s $107 in potential profits. However, the current Profit Tracker is an improvement over the minus $51 per head that producers were experiencing at this time last year, when processing capacity was experiencing substantial constraints.
“Obviously, grain costs are increasing as well,” Amanda Adam, a pork producer in Washington County, Iowa, says. “As a result, the margins are still different than if grain prices were back in the $3 or $4 level.”
What are futures on orange juice?
The FCOJ-A futures contract is the global frozen concentrated orange juice market’s benchmark contract. The contract specifies the price of physical delivery of US Grade A juice (graded by the US Department of Agriculture) in exchangelicensed warehouses around the United States. The United States, Brazil, Costa Rica, and Mexico are among the permitted countries of origin.
How do I get started investing in lean hogs?
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”).
What is the value of a 250-pound pig?
The WHVC not only shows the total weight and value of wholesale cuts for a group, but it also shows the pounds and values of individual wholesale cuts (Table 4). The total wholesale weight of the 250-pound hogs yielding more than 75 percent is 31,861 pounds, priced at $26,582 or $132.91 per head.
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.