Hog futures rose to an all-time high Wednesday as traders pushed up prices on fears of a spreading swine virus. While there are no direct hog exchange traded funds available, investors can still gain exposure to the market through livestock exchange traded notes.
Lean hog futures have been rallying as the porcine epidemic diarrhea virus spread to 25 U.S. states, killing over 4 million pigs, reports Elizabeth Campbell for Bloomberg.
Consequently, pork output in the U.S., the world’s largest exporter of hogs, is expected to drop 0.7% in 2014.
CME lean hog futures for April delivery reached a high of about $114.7 per pound but dipped down to $111.1 in afternoon trading Wednesday.
Lean hog futures have surged 31% year-to-date, the best performing commodity after coffee in the Standard & Poor’s GSCI Spot Index. Hedge funds and large speculators have raised net-long bets on hogs to 65,506 contracts as of Feb. 26, the highest since November.
“Everyone is expecting lower and lower supplies,” Chad Henderson, a market analyst at Prime Agricultural Consultants Inc., said in the article, calling the activity in the hogs market the “rally of the ages.”
Looking ahead, Don Roose, president of risk-management firm U.S. Commodities Inc., believes that many traders are anticipating U.S. pork production to decline in the second and third quarters as well reports Kelsey Gee for the Dow Jones Newswire.
According to the CME Group, lean hog futures are trading in backwardation where later dated contracts cost more than near-term contracts – April contracts are hovering around $111 per pound, whereas June contracts are up to $118 per pound. Exchange traded products that roll front month futures contracts will benefit in a backwardated market. [Backwardation and Contango]