now on a grade and yield (carcass merit) basis. CME Lean Hog Contract Replaces Live Hog Contract .

There are a number of differences All Rights Reserved. I see limited upside in lean hogs as 92.00 has served as resistance the last five weeks. First, the industry began moving to carcass weight pricing in the 1990s when carcass merit pricing began to be widely used. several reasons for the change, not least being that 70 % of hogs are sold A market hog with a live weight of 250 pounds will typically yield 88.6 pounds of lean meat (Pork Facts 2001). Why wouldn’t the contract be called “Carcass Hogs” or the price be a “lean weight” price? Live prices increase relative to carcass prices when supplies are tight for the same reason plus, in the minds of some observers, another one: Live prices are not included in the base prices for hogs purchased through marketing contracts. To see our latest newsletters and current information, visit our website at The rest goes into jowl, lean trim, fat, and miscellaneous cuts and trimmings (USDA-AMS). These files cover more than ten years of newsletters posted on our old website This mud would be weighed — and thus paid for — along with the animal when live weight prices were used. Livestock Update, February 1997.

© 2020 Commodity Trader. The animal’s “yield” is 880/1400 = 62.9 per cent — a very normal yield for cattle. On the flip side, June lean hogs have rallied 5% in the last week – a move I don’t expect to be sustainable. But a small number of hogs were still being sold on a live-weight basis direct to packers so USDA added those animals to its reports in January 2004. The relationship between carcass and live prices will always be tied to carcass yield: $155.68 x 62.9 per cent = $97.92/cwt live. Today I see a spread trade setting up.

No part of this site may be reproduced without permission. Differences include, Description: Lean value of slaughtered hogs that meet the following. Ideally, live cattle will trade higher and lean hogs lower… with both sides contributing to a widening spread. After trading lower by 8.6% in the last four months, prices bounced about 1.5% off yesterday’s lows and have hopped back over the 9-day MA, currently trading at 122.90. But the hog relationship is not quite so simple.

Live price charts, forecasts, technical analysis, news, opinions, reports and discussions. USDA reported only carcass weight prices as part of the mandatory price reporting system beginning in mid-2001. The discrepancy is due to rounding.

But first, let’s take a look at the two commodity markets separately. CME changed its Live Hog contract to a carcass-weight Lean Hog contract (the name was chosen to reflect the improvement of hogs and to keep the LH abbreviation) beginning with the February 1997 contract.

Live cattle and lean hogs fit the bill, with each contract being for 40,000 lb.

If the animal yields a carcass weighing 880 lbs, its carcass-weight value is $1370/8.80 cwt. Some observers suspect that packers buy more hogs on a live weight basis when prices are high to keep these high-priced pigs out of the average carcass price and thus out of the prices of contract-purchased pigs.

Looking back about nine months, the widest the spread traded was 37.50-cents; the narrowest being 29-cents. Newsletter Archive index:

Very confusing to the noninitiated and, since we do not have a secret handshake or initiation ceremony into the fraternal order of livestock market analysts and traders, we thought we would use today to address these questions. This lean meat consists of an average of 21% ham, 20.3% loin, 13.9% belly, 3% spareribs, 7.3% Boston butt roast and blade steaks, and 10.3% picnic. Exchange (CME) switches completely to the Lean Hog contract. Vegetarians need not apply. In fact, they may be more aggressive as it’s possible to “be wrong” on both side of the trade. Again, I’m expecting the spread to widen and suggest trying to jump in and out of a quick trade. The seasonal variation in yields is clearly discernible in the chart.

There were The Lean Hog Index is a two-day weighted average of lean hog values collected As can be seen from the implied yields in the second chart, the live-carcass price relationship for hogs is not nearly as predictable as that of cattle. will converge to the index; prices represent a lean value versus a live value; contract consists of 40,000 pounds of carcass instead of live weight; contracts expire the 10th business day of month; options expire same day as futures contract; no price limit the last two days of trading. Live cattle and lean hogs fit the bill, with each contract being for 40,000 lb., CME Lean Hog Contract Replaces Live Hog Contract, With settlement of the December 1996 Live Hog contract, the Chicago Mercantile