Lean Hog futures allow sellers and buyers, such hog producers and packers, to manage the risk of adverse price movements in their operations. Lean Hog futures trade in units of 40,000 pounds of hog carcasses and in minimum price increments of $10.00. They are listed in February, April, May, June, July, August, October and December.
Live Cattle is a physically-delivered futures contract, meaning that live steers are ultimately delivered. There are specific standards in terms of the quantity and USDA grade of cattle that can be delivered. The details on the delivery requirements and procedures for Live Cattle futures can be found in the CME Rulebook on the CME Group website.
Livestock futures began trading at CME Group in 1964, with the listing of Live Cattle futures. The livestock complex now includes futures and options on Live Cattle, Feeder Cattle and Lean Hogs. CME Group Livestock futures and options provide the ability to manage these market scenarios.
A number of factors can impact livestock production and meat processing and procurement, including weather, disease, the cost of animal feed and changing consumer diets. Livestock futures began trading at CME Group in 1964, with the listing of Live Cattle futures.
Live Cattle futures are designed to allow feedlot operators to hedge against a decline in price before they are able to sell the cattle for processing, and for buyers, such as meat packers, to manage the risk of an increase in the price of the cattle they are planning to purchase for processing, or to protect their profit margin for beef they have committed to ship in the future.
Lean Hogs refers to a hog that is ready for processing at about 275 pounds. Hogs are mainly produced in the Midwest, and it typically takes about six months for a pig to become market-ready . The carcass of a market hog weighs about 200 pounds and will typically yield about 155 pounds of lean meat, which is the core of the lean hog futures contract.
Feeder Cattle are weaned calves that have been raised to a weight of 600 to 800 pounds. A newborn calf averages 70 to 90 pounds when it is born, typically in the Spring. After it is born, it is weaned and allowed to graze for up to nine months in order to reach the minimum weight, at which point it is sent to a feedlot. Once in the feedlot, cattle undergo an aggressive feeding process over the next three to five months, during which they gain an additional 500 pounds to reach a weight of 1100 to 1400 pounds.
Feeder Cattle futures contracts allow participants, such as producers, to hedge a decline in price between the time calves are born and when they are sold to feedlots. It also allows feedlot operators to hedge against an increase in the price of Feeder Cattle before the operator is ready to purchase them for their lot.
A number of factors can impact livestock production and meat processing and procurement, including weather, disease, the cost of animal feed and changing consumer diets.
They are listed for trading in the even months of February, April, June, August, October and December. Live Cattle is a physically-delivered futures contract, meaning that live steers are ultimately delivered. There are specific standards in terms of the quantity and USDA grade of cattle that can be delivered.
In 1984 options on Livestock futures were introduced, which provided hedgers and speculators additional flexibility and opportunities. While Livestock futures are only traded electronically, Livestock options are still traded in open outcry on the floor of the exchange, as well as electronically on CME Globex.
Cattle futures turned lower and didn’t let up, finishing the day locked at the expanded limit. Live cattle remain in expanded limits, 4.50. Feeder cattle are in expanded limits 6.75. Cash cattle started to pick up yesterday, the bulk coming in near 112.
Lean hog futures dropped like a rock yesterday, finishing limit down, giving us expanded limits of 4.50 today. Early indications are for another blood bath. Export sales this morning came in at 38,200 metric tons, down 1% from last week but 88% higher than the 4-week average.
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