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Lean Hog Futures Trading Strategies | Symbols and Contract Specifications

Last Updated on 10 February, 2024 by Trading System

Uses of Lean Hogs

Lean hog futures contracts are very popular in the commodity market because hogs are used in various industries. The common uses of lean hogs are outlined below.

Food: Lean hogs are the major source of pork meat in the world, and several pork products, such as ham, pork loins, and pork chops, are gotten from lean hogs. Pork is an important food source across different cultures and geographies.

Pharmaceutical products: Apart from the meat, other important products derived from lean hogs are pharmaceutical products. Many drugs and other products of medical importance are sourced from hogs, and here are some of them: heparin, insulin, estrogens, cortisone, antidiuretic hormone (ADH), blood albumens oxytocin, heart valve replacements, pepsin, melatonin, and thyroxin.

Industrial products: Lean hogs are also involved, in some ways, in the production of certain industrial products, such as glue, buttons, bone meal, insulation, brushes, upholstery, crayons, insecticides, leather treatment agents, gloves, cosmetics, plastics, antifreeze, plywood adhesives, and floor waxes.

The Largest Producers and Consumers of Lean Hogs

Hogs are reared in many markets around the world for meat production. The largest producer of pork meat is China, followed by the European Union and the United States. Other top producers include Brazil, Russia, Vietnam, Canada, Philippines, Mexico, and South Korea. These markets rely heavily on corn as feed for their hog stock. Of those nations, the top exporters are the European Union, the US, Canada, and Brazil, with carcass exports being a significant part of their trade.

In terms of consumption, the country that continuously ranks at the top of the list of pork consumers is China, followed by the European Union and the United States. Other top consumers include Brazil, Canada, Russia, and Japan. Japan is also the largest importer of pork. Trades are mostly via futures contracts. Traders often keep a close eye on hog producer stocks and corn prices to make informed decisions.

Why Trade Lean Hog Futures Contracts

Trade Lean HogsTrade Lean Hogs

There are different reasons for trading lean hog futures contracts. Traders may enter the market to profit from short-term price fluctuations, while others seek to diversify their stock portfolio or hedge against inflation. Key stakeholders, such as those involved in feeding and cash, trade lean hog futures to ensure a stable market for their business.

Securing a good price: Hog farmers trade lean hog futures to secure a profitable price for their produce, while pork distributors and retailers buy the contracts to ensure a stable supply of pork.

Diversifying portfolio: Lean hog is a popular agricultural commodity that fund managers and investors use to diversify their portfolio away from stocks and bonds. Diversification is important in spreading risk exposure across many asset classes so as to minimize the effects of systemic risk.

Hedging against inflation: Central banks frequently lower interest rates and print more money, thereby reducing the purchasing power of paper money. As with other livestock commodities, the prices of lean hogs are almost certain to go up when the economy begins to overheat.

Speculative trading: Most traders in the lean hog futures market are there for speculative reasons. They aim to profit from the fluctuations in lean hog prices and only make short-term trades.

Lean Hog Futures Trading Strategies

Lean Hog Trading StrategyLean Hog Trading Strategy

Finding a trading strategy on the lean hogs futures market indeed is possible, and it’s a market we like to trade ourselves! In the image above, you see a trading strategy that we’ve been trading for quite some time!

If you want to build trading strategies for the lean hog futures market, we recommend that you have a look at our article on algorithmic trading. 

If you’re already building trading strategies and want some inspiration, then our edge membership is perfect for you!

How to Play the Lean Hog Market

The best way to play the lean hog market is by trading lean hog futures contracts. The Chicago Mercantile Exchange (CME) offers the contract, and it can be traded from any part of the world via the CME Globex electronic trading platform. Feeding hogs with corn and soybean meal can affect their weight.

A lean hog futures contract is equivalent to 40,000 pounds (about 18 metric tons) of lean hogs, and the price quotation is in cents per pound. The weight of the hogs is heavily influenced by their feeding, which often includes corn and soybean meal. The contract normally expires in the months of February, April, May, June, July, August, October, and December, but expiration may vary. At expiration, the contract is settled with cash, so there is no issue of trying to avoid physical delivery.

To start trading lean hog futures, all you need is to create an account with the exchange through your futures broker and deposit the required margin. Since futures contracts are leveraged instruments, you need not have the full dollar worth of a contract before you can trade it. However, it is worth noting that while leveraged instruments can make you more money, they can be very risky.

Apart from trading the futures contract, there are other ways to play the lean hog market, such as lean hog options, lean hog exchange-traded funds, and lean hog CFDs. The price of lean hogs is heavily influenced by the cost of corn, feeding practices, soybean meal usage, and weight gain.

Factors That Affect Lean Hog Prices

Several factors can influence the price of lean hog futures, and these are some of them: feeding practices, corn prices, soybean meal costs, and pounds gained by the hogs.

Weather data: Hogs don’t tend to be very active when the weather is extremely warm, and this can result in fewer births and, subsequently, cause a shortage of hog supply. The reduction in supply can lead to higher prices of lean hogs in the market.

The price of feeds: The main chunk of the cost of producing hogs goes into buying feeds, so feed prices, especially the price of corn, have huge effects on the price of lean hogs — but in an inverse manner. To save cost, when the price of corn rises, farmers push their hogs to the market before they are due. The result is an excess supply of hogs and a decline in prices.

Key Reports: The United States Department of Agriculture (USDA) regularly releases some reports about hogs, and these reports tend to significantly move lean hog prices. Some of the reports include:

  • Hogs and Pigs Report

  • Monthly Slaughter Report

Lean Hog Futures Seasonality

Here is a seasonal chart of the feeding tendencies on the lean hog futures market, influenced by corn and soybean meal crush.

Source

 

What are some important dates for this market?

If you’re planning to trade lean hog futures, it’s important to stay informed about the hog industry. The USDA’s Quarterly Hogs and Pigs Report is a great resource for this. This report is released four times a year, and it provides valuable information on the current state of the hog industry. Specifically, it includes data on the number of hogs and pigs on farms, as well as information on farrowing intentions (i.e., how many sows farmers plan to breed in the future). This information can be used to make informed trading decisions. For example, if the report shows that there are fewer hogs than expected, this could lead to an increase in prices. On the other hand, if there are more hogs than expected, prices may decrease. Additionally, keeping track of feed costs such as corn and soybean meal can also be helpful in predicting future hog prices.

 

What are the trading symbols for Lean Hog futures?

If you’re interested in trading lean hog futures, it’s important to know the trading symbols. The Chicago Mercantile Exchange uses the symbol HE and the Intercontinental Exchange uses LH. These symbols are used to identify and track the price of lean hog futures contracts. Lean hog futures are a type of commodity futures contract that allows traders to speculate on the future price of lean hogs. They are popular among investors because they can be used to hedge against price fluctuations in the pork industry. By using these trading symbols, traders can easily track and analyze the market trends for lean hog futures and make informed decisions about when to buy or sell contracts. It’s important to stay up-to-date on industry news and market trends when trading lean hog futures, as they can be affected by a variety of factors such as weather, supply and demand, government regulations, feed, corn, soybean meal, and crush.

What is the lowest Lean Hog has ever been — its all-time low?

If you are interested in Lean Hog futures trading, then you may want to know about the all-time low of this commodity. The lowest price ever recorded for Lean Hog futures was on April 28, 2020, when it hit $25.05 per hundredweight. Additionally, if you are trading Lean Hogs, you may also want to keep an eye on corn and soybean meal prices.

This was due to the COVID-19 pandemic, which caused a significant drop in demand for pork products as many restaurants and food service businesses closed down. However, since then, the price has rebounded and has been steadily increasing. It’s important to keep an eye on market trends and news related to the pork industry as well as corn and soybean meal to make informed decisions when trading Lean Hog futures.

What is the highest Lean Hog has ever been at — its all-time high?

Lean hog futures trading can be an exciting way to invest in the market. A lean hog is a pig that has been raised for meat and is considered to be a commodity. When trading lean hog futures, investors are essentially buying and selling contracts for the delivery of lean hogs at a future date. The price of lean hog futures can be affected by a variety of factors such as supply and demand, weather conditions, government policies, corn, and soybean meal. The highest price that lean hog futures have ever reached was $1.31 per pound, which occurred in April 2014. This was due to a combination of factors, including a high demand for pork in China and other countries, as well as a decrease in the number of hogs being raised in the United States. However, it is important to note that the price of lean hog futures can be volatile and subject to sudden changes due to corn and soybean meal prices.

Therefore, it is important for investors to do their research and develop a solid trading strategy before investing in this market. Some common strategies include trend following, mean reversion, and breakout trading. By understanding the market and having a well-thought-out plan, investors can potentially profit from the fluctuations in lean hog futures prices. Additionally, it is crucial to keep an eye on the prices of corn and soybean meal as they can greatly impact the lean hog market.

What is the minimum price fluctuation for Lean Hog futures?

When trading Lean Hog futures, it’s important to understand the minimum price fluctuation. This is the smallest amount the price can change before a trader can make a profit or loss. For Lean Hog futures, the minimum price fluctuation is 0.00025 USD per pound. It’s also worth noting that corn and soybean meal are important components of hog feed.

Traders should also be aware of the contract size for Lean Hog futures, which is 40,000 pounds. This means that each contract represents 40,000 pounds of lean hogs. It is also important to note that Lean Hog futures are often impacted by the prices of corn and soybean meal. By understanding these details and monitoring market trends, traders can make informed decisions and potentially earn profits in Lean Hog futures trading.

What moves the Lean Hog market — What affects the Lean Hog market the most?

When we talk about the Lean Hog market, we mean the trading of contracts for future delivery of live hogs. Many people trade these contracts as a way to make money, but it’s important to understand the factors that can affect the market before jumping in. One of the biggest factors is supply and demand. If there are more hogs being produced than people want to buy, the price will go down. Additionally, the price of corn and soybean meal can also have an impact on the market.

On the other hand, if there are fewer hogs being produced than people want to buy, the price will go up. Corn and soybean meal prices can also impact the Lean Hog market as they are key components in hog feed. Severe weather can disrupt transportation and make it difficult to get hogs to market, which can drive up prices. Finally, government policies related to agriculture can also have an impact on the Lean Hog market. For example, if the government decides to subsidize hog farmers, this could increase supply and cause prices to go down. Overall, understanding these factors is key to developing successful trading strategies in the Lean Hog market.

Conclusion

Lean hogs, which are primarily fed with soybean meal and corn, are a major source of pork — the most consumed animal protein in the world. The best way to play the lean hog market is by trading the futures contract, which is offered on the CME and its Globex electronic platform.

Here is our archive with articles about other tradeable futures markets.

FAQ

What are the common uses of Lean Hogs?

Lean hogs are primarily used for food production, serving as a major source of pork meat. Various pork products, such as ham, pork loins, and pork chops, are derived from lean hogs.

Why do traders engage in Lean Hog futures contracts?

Traders enter the Lean Hog futures market for various reasons, such as profiting from short-term price fluctuations, diversifying their portfolio, hedging against inflation, and ensuring a stable market for hog-related businesses.

What is the significance of Lean Hog futures in portfolio diversification?

Lean hog is a popular agricultural commodity for portfolio diversification, allowing fund managers and investors to spread risk across different asset classes, minimizing the effects of systemic risk.

What factors influence the price of Lean Hog futures?

Factors affecting Lean Hog prices include feeding practices, corn prices, soybean meal costs, pounds gained by hogs, weather conditions, and key reports released by the United States Department of Agriculture (USDA).

What are the trading symbols for Lean Hog futures, and what are its historical price extremes?

Trading symbols for Lean Hog futures are HE (Chicago Mercantile Exchange) and LH (Intercontinental Exchange). The all-time low was recorded at $25.05 per hundredweight in April 2020, influenced by the COVID-19 pandemic, while the all-time high was $1.31 per pound in April 2014.

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