Lean Hogs are a futures contract traded on the Chicago Mercantile Exchange (CME) that can be used to speculate or hedge the price of pork. Lean hogs refer to pigs that have reached 250 pounds, which is the minimum weight to slaughter. This can happen as quickly as 6-months. Lean Hog futures contracts are for 40,000 pounds and are cash settle. The lean hog price is calculated by using the CME Cash Hog Price Index, which is the two-day weighted average of cash markets.

Lean Hog contracts were first introduced in 1966 on the floor of the Chicago Mercantile Exchange (CME), and are still traded there to this day.

The U.S. is the world’s largest pork exporter, with most hog production coming out of the Midwest from states like Illinois, Iowa, Minnesota, and North Dakota. As mentioned earlier, it normally takes around six months to raise a pig to 250 pounds at which point it becomes a hog and is ready for slaughter. On average, a 250-pound hog will yield roughly 85-90 pounds of lean hog meat. Ham and loin account for about 40% of that total yield while belly, butt, spareribs, and picnic account for smaller percentages. The rest of the pig goes towards miscellaneous uses. Pork belly, which is codeword for bacon, used to have its own contract that was also traded on the CME. However, the CME group discontinued the contract because of its lack of liquidity.

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