Risk Warning: Your Capital is at Risk.
Lean hogs are the most commonly traded commodity product for gaining exposure to whole hog prices. This guide will help you understand how to trade lean hogs and where you can find regulated, reputable brokers available in .
In a hurry? If you want to get started trading lean hogs today, here are brokers that accept traders in to consider:
Disclaimer: Availability subject to regulations.
Between 74-89% of retail investor accounts lose money when trading CFDs.
How to Trade Lean Hogs
Companies and individuals involved in the production, distribution, and sale of pork products use lean hog futures and options as tools for hedging risk. As a result, these financial products occupy a critical role in global food commodity markets.
Traders can speculate on lean hog prices in several ways, including:
- Lean hogs futures or options on futures
- Contracts for Difference (CFDs) on lean hogs
- Exchange-Traded Funds
Traders have several ways to get price exposure to lean hogs:
| Method of Investing | Complexity Rating (1 = easy, 5 = hard) | Expiration Dates? | Mgmt. Costs? | Leverage? | Regulated Exchange? |
|---|---|---|---|---|---|
| Lean Hog Futures | 5 | ✅ | ❌ | ✅ | ✅ |
| Lean Hog Options | 5 | ✅ | ❌ | ✅ | ✅ |
| Lean Hog ETFs (ETNs) | 2 | ❌ | ✅ | ❌ | ✅ |
| Lean Hog CFDs | 3 | ❌ | ❌ | ✅ | ✅ |
Lean Hogs Futures
The Chicago Mercantile Exchange (CME) offers a futures contract that settles into 40,000 pounds (18 metric tons) of lean hogs.
The contract trades globally on the CME Globex electronic trading platform and has a variety of expiration months and cycles.
Futures are a derivative instrument through which traders make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions. At expiration, lean hog contracts are financially settled.
Trading in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.
Lean Hogs Options on Futures
The CME offers an options contract on lean hog futures.
Options are also a derivative instrument that employs leverage to trade in commodities. As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money.
Options buyers pay a price known as a premium for each contract. An options bet succeeds only if the price of lean hogs futures rises above the strike price by an amount greater than the premium paid for the contract. Therefore, options traders must be right about the size and timing of the move in lean hog futures to profit from their trades.
Lean Hogs ETFs
These financial instruments trade as shares on exchanges in the same way that stocks do.
There is one ETF that trades in London and invests in lean hogs:
- ETFS Lean Hogs –
There are three US ETFs for trading generally in livestock:
| iPath Bloomberg Livestock Total Return | E-TRACS UBS Bloomberg Livestock Commodity Total Return | iPath Pure Beta Livestock ETN |
|---|---|---|
Shares of Lean Hogs Companies
There is no adequate way to get pure-play exposure to lean hog prices through the equity market. Most ranches that raise lean hogs are privately owned or part of big public companies that engage in other activities.
Traders seeking exposure are better off looking to ETFs that invest in futures than to equities.
Contracts for Difference (CFDs)
A popular way to trade lean hogs is through the use of a contract for difference (CFD) derivative instrument. CFDs allow traders to speculate on the price of lean hogs without owning the underlying assets. The value of a CFD is the difference between the price of lean hogs at the time of purchase and its current price.
Many regulated brokers worldwide offer CFDs on lean hogs. Customers deposit funds with the broker, which serve as margin. The advantage of CFDs is that traders can have exposure to lean hog prices without having to purchase shares, ETFs, futures, or options.
IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.
Where Can I Trade Lean Hogs?
If you want to start trading lean hogs and other agricultural commodities, here’s a list of regulated brokers available in to consider.
Top Brokers Available in
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Reasons To Trade Lean Hogs
Trading lean hogs can be a good addition to a trader’s portfolio for the following reasons:
- Bet on demand from China
- Inflation hedge
- Portfolio diversification
Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.
Bet on Demand from China
Growth in Chinese demand for pork might be the best reason to trade lean hogs.
The global supply of pork has tightened in recent years as Chinese imports have risen sharply. If these patterns continue, there could be supply shortages and higher lean hog prices.
Of course, the biggest determinant of demand in China will be the economy. However, pork has long been the favored animal protein in the country, and demand elasticity might be less than for other types of meat.
Inflation Hedge
Trading lean hogs is a way to hedge against the loss of purchasing power from inflation. Livestock is almost certain to become more expensive if the world economy starts to overheat.
Low interest rates from the Federal Reserve and other central banks have produced speculative bubbles in assets ranging from equities to high-yield debt to cryptocurrencies.
Yet food remains the most basic and fundamental necessity. Food commodity prices could see the largest increases if the economy experiences higher inflation. Lean hog prices could benefit from these conditions.
Diversify Your Portfolio
Trading lean hogs might be a way to diversify a portion of a portfolio out of stocks and bonds and into commodities.
Potential Risks of Trading Lean Hogs
Traders should consider these three risks of trading lean hogs:
- An economic slowdown in China could seriously limit demand for pork.
- Better hog breeding techniques and animal husbandry practices could create oversupplies of lean hogs.
- Health and environmental concerns could lead to decreases in pork consumption. In particular, hog producers have come under attack from environmental groups for waste and animal cruelty. Changes in perceptions about the industry could dampen demand.
Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.
Further Reading
- Find out more about lean hogs production and what drives prices.
- Step-by-step guide to commodities trading.
- Find a Commodities Broker
