CME Lean Hog Contract Replaces Live Hog Contract

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CME Lean Hog Contract Replaces Live Hog Contract

Livestock Update, February 1997

Cindy Wood, Animal and Poultry Sciences

With settlement of the December 1996 Live Hog contract, the Chicago Mercantile Exchange (CME) switches completely to the Lean Hog contract. There were several reasons for the change, not least being that 70 % of hogs are sold now on a grade and yield (carcass merit) basis. There are a number of differences between the two contracts, although the abbreviation (LH) will remain the same. Differences include

cash settlement to a "Lean Hog Index", meaning that the futures price 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

Lean Hog Contract Specifications

Description: Lean value of slaughtered hogs that meet the following

Trading unit

Price quote

Minimum price fluctuation

Daily price limit

no price limit last two days of trading

Contract months

Trading hours

last day: 9:10 a.m. - noon

Last trading day

Final settlement

The Lean Hog Index is a two-day weighted average of lean hog values collected by USDA from the Western Cornbelt, Eastern Cornbelt, and MidSouth regions.

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