How to Trade in Lean Hogs on the Commodities Market

By Amine Bouchentouf

The lean hog commodity futures contract (which is a contract for the hog’s carcass) trades on the Chicago Mercantile Exchange (CME) and is used primarily by producers of lean hogs — both domestic and international — and pork importers/exporters.

Launched in 1997, the lean hog contract is a fairly new addition to the CME, launched as a replacement after the live hog futures contract was retired. The lean hog contract replaced the live hog contract since producers and consumers of these products don’t transact the live animal (live hog), so it made more sense for the futures contract to track the product traded in the marketplace.

Here are the contract specs for lean hogs:

  • Contract ticker symbol (open outcry): LH

  • Electronic ticker (CME Globex): HE

  • Contract size: 40,000 pounds

  • Underlying commodity: Lean hogs (hog barrow and gilt carcasses)

  • Price fluctuation: $0.00025 per pound ($10 per contract)

  • Trading hours: 9:10 a.m. to 1:00 p.m. (CST), electronic and open outcry

  • Trading months: February, April, May, June, July, August, October, and December

Perhaps no other commodity, agricultural or otherwise, exhibits the same level of volatility as the lean hogs futures contract. One of the reasons is that, compared to other products, this contract is not very liquid because it is primarily used by commercial entities seeking to hedge against price risk.

Price of lean hogs futures on the CME, 2002-2010.
Price of lean hogs futures on the CME, 2002-2010.