Learn About Futures Insider for August 11, 2011: Lean Hogs

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Hogs – or pigs – are the humble livestock that have been domesticated for thousands of years. A global source of meat believed to be descended from the wild boars of Eurasia; pigs are unique in that they are likely livestock for settled farming communities rather than nomadic peoples since they are not easily herded for long distances. Pig, swine, shoat, piglet, boar, hog, stag, gilt, sow, or barrow; no matter how you describe them, these animals are an integral part of food and economics for many countries across the globe.

Contract Size: 40,000 lbs (`18 metric tons)

Price Quote & Tick Size: cents per pound; minimum fluctuation is $.00025 per pound ($10 per contract)

Contract Months: February, April, May, June, July, August, October, December

Trading Specs: Floor trading is conducted 9:05 am to 1:00 pm CT; Globex trading MON 9:05 a.m. - FRI 1:55 p.m. Central Time
Daily trading halts 4:00 p.m. - 5:00 p.m. Central Time

Daily Price Limit: $.03 per pound above or below previous day's settlement price; none for expiring
contract in last 2 trading days.

Trading Symbols: LH; HE on Globex

Hog Facts

A larger percentage of hog production occurs in the Midwestern United States and the largest individual state production falls to Iowa, North Carolina, Minnesota, and Illinois. Modern hog farmers feed their swine a mixture of corn, wheat or soybean meal enriched with vitamins and minerals. A method of “finishing” hogs by feeding them nothing but corn prior to butchering them was adapted by colonists in early Pennsylvania.

Globally, production, imports and exports are distributed as shown:


Price highlights for this market include:

* Hog prices traded around $14 per hundredweight in the 1950s, prompting some Iowa politicians to call for the government to purchase supplies to help move prices back towards $18. Lows were attributed to higher production and slaughter.
* The removal of a price freeze spiked market prices in the early 1970s, only to see a reversal as production increased. 1975 saw another gain in prices on the backs of higher corn costs.
* Herd buildup and a move towards record slaughter numbers pushed prices below $30 per hundredweight by 1980. Prices eventually rebounded but remained choppy through the next decade due to ebbing consumer demand for pork.
* In 1997, An outbreak of hoof-and-mouth disease threatened herds in Taiwan, pushing the price of hogs higher as traders began to speculate that Japan would see a spike in import demand. In the US, concerns over mad cow disease boosted pork demand, adding to demand pressures.
* In 1998, hog production jumped by nearly 10 percent. Between the closure of some packing houses and an increase in commercial production houses, supply pressure tanked hog prices. Decade lows of nearly $20 per hundredweight would lead many producers to stop raising hogs.
* Hog production lows help prices climb again, only to sell off below breakeven prices in 2002. Price declines were blamed on larger herds and weak pork demand.
* Aggressive import demand from China pushed hog prices to fresh record highs above $100 per hundredweight in 2011.



Key terms for this market include:

Sow – female swine. They can give birth to a litter of pigs twice a year, with eight to twelve baby pigs per litter.
Farrowing – the name for giving birth to baby pigs
Thiamin – a “water-soluble vitamin of the B complex” which helps change carbohydrates into energy. Yeast and pork are the most concentrated sources of this vitamin.
Finishing – a process of feeding the hogs a specific food in the time frame leading up to slaughter

Key Uses

The obvious end use for lean hogs is meat (pork) however; the hide, hairs, and lard are also usable products. Pork fat may be found in weed killers, cosmetics, crayons, and other commercial products. Pork bellies are a food product for bacon or other dishes.

For more at commoditytrading.yuku.com/topic/609