Trading lean hogs and pork bellies on the Chicago Mercantile Exchange started as a way to try to hedge the costs and potential price risks occurring from volatility in the markets. This may have also helped to protect inventories as those meats are already processed; therefore, their costs may have already been accrued and trading pork bellies and lean hogs on the CME was a way to try to reduce processing costs or maintenance fees. Doing this also helps to churn up competition in pork belly and lean hog markets by allowing for fair price discovery. Considering the astounding amounts of high-quality cuts of meat that come from the pig - as well as their staple in diets extending around the globe - it is no wonder these markets found a home on the CME.
It is estimated that upwards of 80 breeds and 200 varieties of lean hogs exist; and while lean hogs are historically the most consumed meat in the world, there are still many other uses that help to maintain possible higher quality of life for humans. Heart valves, connective tissue, insulin, and skin for grafting are just a few of the ways that lean hogs assist the human race.
The biggest lean hog producer in the world has recently been China, but they also consume the most pork of any nation in the world at about 530 million hogs annually (according to data from www.usda.gov). This should come as no surprise as pork is a staple of the Asian diet; on average, pork is 18% of the Chinese diet. The US is the biggest exporter of pork to Japan, but the summer months tend to be a big draw on the "other white meat" in the US - something that a good, intuitive lean hogs trader remembers and takes into consideration when dealing with the pricing in the market.
How does all of this information factor into trading lean hogs, analyzing the market and prices, and assist you in deciding which contracts to trade? You'll find out throughout this website as well as in our FREE report, 6 Things You Need to Know About Hogs. This reference material can prove to be instrumental in heightening your awareness of pork belly - as well as lean hog - futures and prices.
