Newspaper article St Louis Post-Dispatch (MO)

Piggy Banking Exchange Takes Oink out of Hog Futures

Newspaper article St Louis Post-Dispatch (MO)

Piggy Banking Exchange Takes Oink out of Hog Futures

Article excerpt

In the futures markets, the live hog is heading the way of all flesh.

The Chicago Mercantile Exchange Friday introduced a lean hog contract pegged to the value of gutted carcasses, spelling the beginning of the end of tying the contract's worth to about 180 hogs on the hoof at a terminal in Peoria, Ill.

The old specifications made the 29-year-old contract ineffective, if not useless, to hedge meat prices, traders said.

The change comes because the industry in the past few years has shifted from pricing pork based on the size of living hogs to the amount of usable meat the animals produce.

"That's the trend in the industry," said Paul Peterson, director of commodity research at the Chicago Mercantile Exchange. "Hogs today are sold more on a carcass basis than on the hoof."

Traders say the new contract will become a more useful way for pork processors and hog farmers to hedge prices.

And by settling for cash instead of the delivery of a truckload of 220-pound hogs, prices will more accurately reflect the underlying market and could attract overseas customers, who have become larger consumers of U. …

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