Lean Hogs Jun '19 (HEM19)
|Tick Size||0.00025 per pound ($10.00 per contract)|
|Daily Limit||3.75 cents per pound ($1,500 per contract) Expanded limit 5.5 cents|
|Contract Size||40,000 pounds|
|Trading Months||Feb, Apr, May, Jun, Jul, Aug, Oct, Dec (G, J, K, M, N, Q, V, Z)|
|Trading Hours||8:30a.m. - 1:05p.m. (Settles 1:00p.m.) CST|
|Value of One Futures Unit||$400|
|Value of One Options Unit||$400|
|Last Trading Day||The tenth business day of the contract month|
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 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 CME Group. 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 - CME lean hog futures prices (Barchart.com electronic symbol HE) trended lower into Q2- 2018 and fell to a 2-year low in April of 50.475 cents per pound. Ample supplies amid slack demand weighed on hog prices after the U.S. Q1 Quarterly Hogs & Pigs report showed that hogs marketed for slaughter as of March 1 rose +3.3% yr/yr to 66.708 million hogs, the highest for a March 1 since the data began in 1964. Also, U.S. domestic pork demand plunged after wholesale pork prices tumbled to a 2-year low in April. Hog prices rebounded into July to a 1-1/2 year high of 84.075 cents per pound as the slump in prices spurred foreign demand as the USDA projected that U.S. 2018/19 pork exports would climb +2.1% yr/yr to a record 6.095 billion lbs. Hog prices sank to a 2-year low of 48.925 cents per pound in August on concern that foreign demand for U.S. pork would collapse after retaliatory tariffs from China, Canada and Mexico, which together account for 60% of all U.S. pork exports. Hog prices recovered into October, however, after Hurricane Florence disrupted pork production in North Carolina, the second largest U.S. hog-producing state. Also, foreign-demand prospects for U.S. pork improved after the new U.S.-Mexico-Canada trade deal was announced. Finally, Chinese demand for U.S. pork was supported by the African swine fever virus that forced pig farmers in China to cull more than 900,000 hogs in 2018 to try to contain the virus, sharply reducing China's pork supplies. Hog futures prices ended 2017 up +8.5% yr/yr at 71.775 cents per pound.
Supply - The number of hogs on world farms as of January 1, 2019, rose by +1.1% to 781.565 million head. The number of hogs in the U.S. as of January 1, 2019, rose by +3.1% to 75.750 million head. The countries with the largest number of hogs as of January 1, 2019, were China with 56.3% of the world's hogs, the European Union with 19.1%, the U.S. with 9.7%, and Brazil with 4.9%.
Demand - The federally-inspected hog slaughter in the U.S. in 2017 rose by +2.7% yr/yr to 120.516 million head, a new record high. U.S. hog sales in 2017 rose by +3.7% yr/yr to 171.422 million head.
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