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What Moves Lean Hogs Futures Price?

lean hogs price study

Lean hogs is a term that refers to grey pork that is traded on option and mercantile exchanges and lean hogs futures price is affected by supply and demand. The major portion of pork meat eaten in the United States comes from this type meat.

Lean hog futures are exchange traded contracts where the buyer of the future agrees to take delivery of a specified quantity of the commodity at a future date at a price that is decided at the time of the contract.

The contract size in lean hog futures is normally 40,000 pounds and lean hogs futures price is indicated in cents per pound.

Daily Lean Hogs Prices (CME)

Demand for Lean Hogs

The demand for pork or lean hogs depends on the season. In the United States the demand peaks in summer when the use of barbecues in American backyards is high. Producers have started rearing hogs that have leaner meat as the high quantity of fat in pork has led to medical problems among people.

The highest consumers of pork in the world are the Chinese and their country also produces the largest amount of pork. In spite of that they still import a fair quantity of pork from the US and other countries. It is said that lean hogs futures are largely controlled by prices that the Chinese are prepared to pay.

lean hogs point and figure chart

Factors Affecting Lean Hogs Futures Price

The prices of hogs are dependent on the feed costs which are in turn affected by the weather. Disease is also a constant threat and any epidemic can severely affect lean hogs futures price. Consumption of pork meat in the world is about 92 million tons per year, with China producing about half of this. Countries that do export a lot of this meat are the European Union, Canada and the United States.

Japan, Russia and Mexico are major importers.

Lean Hogs Futures

Lean hogs are hogs aged about six months that have a weight of about 220 to 240 pounds and about 165 such kill-able hogs represent a contract of 40,000 pounds in lean hog futures.

A future is a form of bet between the seller and the buyer as to what the price of a commodity will be at some time in the future. Similar deals are made in cattle futures and commodity futures. Such contracts can be sold by either of the parties at any time before the date of delivery.

When a buyer does not want to actually take delivery of the lean hogs or other commodity being traded he can take an option to buy. This does not need taking delivery and the seller has the additional advantage of continuing to have the material for trade at futures prices if the option is not exercised.

Lean hog futures are considered to be a very liquid form of investment. Cash margin requirements are about $1200 for 40,000 pounds. The range for the buying and selling of lean hogs has traditionally varied from 20 cents to 85 cents a pound.

Historical Lean Hogs Futures Price Highs and Lows

There have been times when the market has doubled in a short period of time, with highs occurring in the period of April and May and the lows occurring in late fall. These variations in prices are largely influenced by demand and supply of foreign countries. A major market is China, with its huge population, and able to influence the demand for pork.

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