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Lean Hogs (P) June 2012 (LHM12)

94.750s+0.775 (+0.82%) 7:40P EDT (CME)
Commodity Price Quote as of Wednesday, May 22nd, 2013 View Help

Contract Specifications

Symbol LH
Name Lean Hogs [Pit] (LH)
Exchange CME
Trading Months February, April, May, June, July, August, October, December (G, J, K, M, N, Q, V, Z)
Trading Unit 40,000 pounds
Tick Size 0.025 cents per pound ($10.00 per contract)
Daily Limit 3.0 cents per pound ($1,200 per contract)
Trading Hours 9:10a.m. - 1:00p.m. CST
Last Trading Day The tenth business day of the contract month
Value of one futures unit $400
Value of one options unit $400

CRB Yearbook Description

Hogs are generally bred twice a year in a continuous cycle designed to provide a steady flow of production. The gestation period for hogs is 3-1/2 months and the average litter size is 9 pigs. The pigs are weaned at 3-4 weeks of age. The pigs are then fed so as to maximize weight gain. The feed consists primarily of grains such as corn, barley, milo, oats, and wheat. Protein is added from oilseed meals. Hogs typically gain 3.1 pounds per pound of feed. The time from birth to slaughter is typically 6 months. Hogs are ready for slaughter at about 254 pounds, producing a dressed carcass weight of around 190 pounds and an average 88.6 pounds of lean meat. The lean meat consists of 21% ham, 20% loin, 14% belly, 3% spareribs, 7% Boston butt roast and blade steaks, and 10% picnic, with the remaining 25% going into jowl, lean trim, fat, miscellaneous cuts, and trimmings. Futures on lean hogs are traded at the Chicago Mercantile Exchange. The futures contract is settled in cash based on the CME Lean Hog Index price, meaning that no physical delivery of hogs occurs. The CME Lean Hog Index is based on the 2-day average net price of slaughtered hogs at the average lean percentage level.

Prices - Lean hog futures prices began 2011 on firm footing and ratcheted higher into August 2011 when they posted a record high of 107.475 cents a pound, the highest since hog futures trading began in 1966. The main bullish factors were the prospects of increased U.S. pork exports to Japan from the March 2011 earthquake crisis and increased exports to South Korea after it culled 25% of its hog herd from foot-and-mouth disease. Lean hog prices then moved lower the rest of 2011 and dropped to a 1-year low in December 2011, finishing the year +5.7% at 84.300 cents a pound. Bearish factors for hog prices the second half of 2011 included (1) increased output with 2011 U.S. pork production up +1.4% y/y to 22.8 billion pounds, and (2) the December 2011 Quarterly Hog & Pigs report that showed a +1.5% y/y increase in the U.S. hog inventory to 65.9 million hogs and a rise in pig litters to a record 10.02 pigs in the 3 months ended November 2011. Foreign demand strengthened in 2011 with U.S. pork exports up 21% y/y, although the USDA projects that 2012 U.S. pork production will to increase by +1.9% y/y to 23.2 billion pounds.

Supply - World pork production in 2011 fell 1.6% yr/yr to 101.127 million metric tons. The USDA is forecasting a rise of +2.2% to 103.433 million metric tons in 2012. The world's largest pork producers are China with 49% of world production in 2011, the European Union with 22%, and the U.S. with 10%.

U.S. pork production in 2011 rose +0.9% to 10.278 million metric tons. The USDA is forecasting that U.S. pork production in 2012 will rise by 1.8% to 10.466 million metric tons. The number of hogs and pigs on U.S. farms in 2011 (Dec 1) rose by +0.1% to 65.850 million, down from the more than 6-decade high of 68.117 in 2007. The federally-inspected hog slaughter in the U.S. in 2011 rose +0.6% to 109.956, down from the 2008 record high of 115.421 million head.

Demand - World consumption of pork in 2011 fell by -1.7% yr/yr to 100.849 million metric tons. The USDA is forecasting an increase of +2.0% in 2012 to 102.898 million metric tons. U.S. consumption of pork in 2011 fell by -3.1% to 8.384 million metric tons. The USDA is forecasting a +1.7% yr/yr increase in U.S. pork consumption to 8.526 million metric tons in 2012. The U.S. accounted for 8.3% of world consumption in 2011.

Trade - World pork exports in 2011 rose +8.9% yr/yr to 6.574 million metric tons but the USDA is forecasting a decline of -0.4% for 2012 to 6.545 million metric tons. The world's largest pork exporters are the U.S. with 34% of world exports in 2011, the European Union with 30%, Canada with 18%, and Brazil with 9%. U.S. pork exports in 2011 rose +17.2% yr/yr to 2.246 million metric tons and the USDA is forecasting a rise of +2.8% in 2012 to 2.309 million metric tons.

World pork imports in 2011 rose +7.2% to 6.266 million metric tons, but the USDA is forecasting a decline of -4.0% to 6.018 million metric tons in 2012. The world's largest pork importers are Japan, which accounted for 19% of world imports in 2011, Russia (15%), Mexico (10%), South Korea (10%), and China (9%).

Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.
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