Because of the instability of hog prices, the pork sector relies heavily on lean hog futures as an important form of risk management and hedging. The buying and selling of these futures contracts often draw in many speculative positions. Another word for "pork" traded on the CME's options and futures markets is "lean hog."

Fundamentals

The Midwest is home to the majority of the country's hog farms. Iowa, Minnesota, and North Carolina are the three states that produce the most hogs overall. The United States is the top exporter of pork in the world. From the time it is born until it is ready to be slaughtered, it usually takes six months. When hogs attain a weight of around 280 pounds, they are often ready to be sold at the market or slaughtered.

An average of around 140 pounds of bone-in retail cuts may be obtained from a pig raised for the market and had a live weight of 280 pounds. This package includes 35 pounds of ham and 35 pounds of loin. There are also 29 pounds of bacon and spare ribs and 14 pounds each of Boston butt and roast. Pork bellies, which used to be traded on the CME, are most often used to produce bacon. Before being processed, pork bellies may be frozen and kept for up to a year. Contract negotiations were terminated because there was insufficient funding.

Corn and Hogs

Because hogs consume maize, there is a significant relationship between the price of corn and the price of lean hog futures. Farmers often send their hogs to market at younger ages and at lower weights to avoid incurring large feed expenditures if corn prices significantly increase. When this occurs, the price of lean hog futures often decreases due to increasing supply.

Keeping an eye on the Hogs and Pigs Report is one of the best ways to get an idea of how much pork will be produced in the future. If the number of newborn pigs is fewer than in the previous quarter, there is a good chance that total hog output will be reduced in the next six months, when the pigs are ready to be sold.

Reports

A new edition of the Hogs and Pigs Report is published each quarter. The report on hogs provides information on the pig crop in the United States, including inventory numbers and weights. The statistics emphasize both the present supplies that are available and the supplies that are anticipated to be available in the future.

Developments

Pork is an important source of animal protein in many parts of the globe. The hog futures market has seen a considerable degree of price volatility over the course of the last several years. Lean hog futures reached an all-time high on March 18, 2014, when they were trading at over $1.33 per pound. This was due to the fact that the porcine epidemic diarrhea virus, also known as PEDv, was responsible for the death of over seven million suckling pigs. This resulted in a shortage of pork, which drove the price of animal protein through the roof. A vaccination that worked well has stopped any more PED outbreaks from occurring. The price of futures contracts on lean hogs returned to 60 cents per pound during the summer of 2016.

Smithfield Foods, the biggest hog processing enterprise in the United States, was purchased by a Chinese corporation in 2013. The sale of the corporation was initially met with considerable resistance from members of Congress; nonetheless, it was ultimately authorized, and China today controls a significant portion of the pork market in both the United States and internationally. The acquisition of Smithfield Foods is another illustration of China's insatiable hunger for commodities resources located worldwide. Pork is an essential source of animal protein and a fundamental component of the diets of a great number of people.

As a result of the exponential growth in the world's population, the rivalry for food will continue to burden the basic aspects of lean hogs and other commodities whenever there are supply constraints. It is conceivable that demographics will trigger new highs in several food markets when supplies are constrained.