What are lean hogs?
Various terms are used to describe lean hogs. Terms such as:
- The term lean hogs refers to ‘industrially-raised hogs or pigs.’
- ‘Lean hogs is the name for pork as a commodity.’
- ‘Lean hogs is a technical designation used in the commodities trading of pork products.’
- ‘Commodity pigs.’
What type of commodity is lean hogs?
Lean hogs are classified as an agricultural commodity, which refers to commodities that are cultivated and harvested, or raised, to provide food and drinks, or for industrial uses.
There are several ways to categorise agricultural commodities, of which the following categorisation is an example:
- Animals that become food, such as lean hogs, live cattle, and feeder cattle.
- Grains like corn, wheat, rice, and oats, to name a few.
- Cultivated for industrial uses. For example, cotton, and lumber.
- Products that you can drink, such as cocoa, coffee, orange juice, and tea.
The production of lean hogs
- Top producers of lean hogs
The following information regarding the top 10 global producers of lean hogs is obtained from a well-known commodity broker:
Rank Country/Region Production in 2021 Estimated production in 2022 Production increase/decrease: 2021 - 2022 1 China2 47 500 51 000 7.37% 2 European Union3 23 720 23 150 -2.40% 3 United States of America 12 559 12 288 -2.18% 4 Brazil 4 365 4 410 1.03% 5 Russia 3 700 3 730 0.81% 6 Vietnam 2 590 2 720 5.02% 7 Canada 2 120 2 070 -2.36% 8 Mexico 1 484 1 535 3.44% 9 South Korea 1 407 1 410 0.21% 10 Japan 1 318 1 315 -0.23%
Notes
- In 1 000 metric tonnes.
- In 2021, China produced 47.14 percent of the total production of the top ten producers. The projection is that the country will produce almost 50 percent of the production of the top ten major producers of lean hogs in 2022.
- In the European Union (EU), Spain is the largest producer of lean hogs, followed by Germany and France. The three countries represent about 50 percent of the EU’s total production. The region exports about 13 percent of its total production, mainly to East Asia, in particular China.
- The three top producers, China, the EU, and the USA, produced 83 779 metric tonnes combined in 2021. This is 83.14 percent of the total production of lean hogs of the ten largest global producers of lean hogs.
- The production process of lean hogs
Contrary to the beef industry, the production of lean hogs moves at a quick pace. It takes about six months for a hog to grow to a market weight of approximately 122.5 to 127 kilograms (270 to 280 pounds).
The breeding and raising of lean hogs are a branch of animal husbandry. They are primarily raised for their meat content. Hence, they tend to be leaner than the other types of pigs.
Terms used in the production of lean hogs:
- Gilts are young female hogs that have not yet given birth. They reach maturity at 170 to 220 days of age. Producers search for gilts that have growth and breeding potential.
- Sow is the name used for a gilt after delivering her first litter of piglets.
- Boar refers to an uncastrated male pig that is kept for breeding.
The production process includes the breeding, farrowing, weaning, nursery, finishing, and packing stages.
- Breeding
Usually, producers of hogs buy boars from pig breeding farms. Three methods can be used to breed hogs, namely:
- Pen mating is where one or more boars are placed with a number of sows.
- Hand mating occurs when one boar is placed with a single sow or gilt.
- Artificial insemination is a process in which the semen of a boar is used to make a sow or gilt pregnant without sexual intercourse. This is a more labour-intensive method, allowing pig farmers to control the genetics of the hogs.
- Farrowing
Farrowing refers to a sow (female hog) giving birth to around 9 to 12 piglets. Due to improvements in health, genetics, and production methods, one sow can farrow at least twice a year, giving birth to around 24 piglets in one year. At birth, a piglet weighs about 0.9 – 1.36 kilograms (2 – 3 pounds).
After gestation periods of nearly 4 months, the sows are ready to give birth. They are taken to a specific barn on the pig farm where they will farrow and stay for three to four weeks, weaning the piglets.
- Weaning
Sows wean piglets for three to four weeks. After weaning, the sows are either taken for rebreeding or sent to a market.
Not all the piglets survive the weaning stage. It is estimated that about 5 percent of them die from factors such as bad weather, suffocation, or disease.
At weaning, a piglet weighs approximately 5.9 – 6.8 kilograms (13 – 15 pounds).
- Nursery stage
After the weaning stage, the hogs are moved to a nursery barn where they will stay for approximately six to eight weeks, preparing them for the finishing stage.
During this stage, the hogs are typically fed a diet of corn and soybean meal as much as 1.8 kilograms a day (about 4 pounds). A diet can also include grains such as barley, oats, or wheat.
- Finishing
The hogs are moved from the nursery barn to a finishing barn where they will spend about 16 to 17 weeks, feeding daily on rations of feed of 2.7 to 4.5 kilograms (6 to 10 pounds). The rations include corn and soybean meal or other types of grains, as well as vitamins and minerals, ensuring that the hogs receive proper nutrients.
Hogs typically gain approximately 0.45 kg (1 pound) a day during the finishing stage.
After reaching 122.5 to 127 kilograms (270 to 280 pounds), the hogs are sold to packers who harvest the hogs at a packing plant.
- Packing
At the packing plants, the hogs are slaughtered, and the carcasses are cut into popular cuts like loins, bellies, spareribs (from the breast), legs, and butts – cuts that come from the upper parts of the shoulders.
A variety of other cuts and trimmings complete the rest of the production.
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Trading lean hogs as an agricultural commodity
The best way to get exposure to lean hogs as an agricultural commodity is by trading lean hog futures contracts, which are offered by the Chicago Mercantile Exchange (CME). The contract can be traded from any country and region in the world via the CME Globex electronic trading platform.
Specifications of a lean hog futures contract:
- Size: 40 000 pounds, which is about 18 metric tonnes.
- Unit of price quotation: USD/Lbs. For instance, as of November 8, 2022, Trading Economics quoted the price of lean hogs as 85.58 USD/Lbs, indicating that ‘Lean Hogs increased 4.10 USD/Lbs or 5.03% since the beginning of 2022, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity.’
- Expiry dates: The contract usually expires in February, April, May, June, July, August, October, and December. Although it may vary.
- Settlement: At expiration, the contract is settled in cash.
To start trading lean hog futures, you will need to open a trading account with a commodity broker. Such a broker will advise you about the deposit required as a margin to trade futures contracts. Also, the broker will provide you with information about other ways to trade lean hogs as an agricultural commodity, including lean hogs options on futures, lean hogs contracts for difference (CFDs), and lean hogs exchange-traded funds (ETFs).
Factors that influence the price of lean hogs as an agricultural commodity
There are several factors that can affect the price of lean hogs, including the following factors:
- Weather
Extremely hot summer weather can make hogs more inactive and consequently lessen their desire to mate. This could result in fewer births in the months during late autumn and winter, causing a shortage of hog supplies.
The reduced supply can subsequently lead to increases in the prices of lean hogs in the markets.
- Feed prices
Feed prices, especially the price of corn, play a major role in the production costs of lean hogs, representing more than two-thirds of the production costs. Consequently, the prices of feeds for hogs have significant effects on the price of lean hogs.
However, this is not a direct effect but an inverse effect. This situation can be explained as follows: As the price of corn increases, farmers take their hogs to the market before they have reached the preferred market weight to save on production costs. The result is an excess supply of hogs which drives the hog prices lower.
- Substitutions
Regarding animal protein, consumers have several choices such as beef, lamb, chicken, and fish. The prices of these products often play a significant role in which of these products consumers choose. If the prices of lean hogs rise, consumers may prefer one of these substitutes in their diets.
- Influence of China and emerging countries
As mentioned, China is by far the major supplier and consumer of pork meat, consuming almost 50 percent of the global supply of pork products. The country is also one of the major importers of pork.
The level of China’s economy impacts the wealth of its population. When the population becomes wealthier, pork consumption will increase, and vice versa.
The demand for pork products in emerging countries such as Brazil, Mexico, and South Korea may also increase as their economies increase in strength.
For what are lean hogs used?
- Major consumers of pork meat
China is not only the largest producer of pork meat but also the major consumer. The country is followed by the European Union (EU), and the USA. Other large consumers include Brazil, Canada, Russia, and Japan, which is also the major importer of pork meat.
- Uses
The uses of lean hogs can be classified into three groups:
Food
Lean hogs are globally the major source of pork meat, considered a valuable and important food source across different cultures, regions, and countries. Pork meat is the most consumed animal protein in the world.
Several pork products such as pork loins, pork chops, pork necks, pork bellies, and ham are obtained from lean hogs.
Pharmaceutical products
In the pharmaceutical industry, various products are manufactured using lean hogs as a source. The following pharmaceutical products are, amongst others, derived from lean hogs:
- Antidiuretic hormone (ADH)
- Blood albumens
- Cortisone
- Estrogens
- Heart valve replacements
- Heparin
- Insulin
- Melatonin
- Oxytocin
- Pepsin
- Thyroxin
Industrial products
Lean hogs also have a part in the production of several industrial products, including:
- Antifreeze
- Buttons
- Bone meal
- Insulation
- Upholstery
- Crayons
- Floor waxes
- Plywood adhesives
- Cosmetics
- Gloves
- Brushes
Note: This article does not constitute investment, financial or trading advice. Please obtain the advice of a professional and regulated commodity broker before making trading and investment decisions.
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