How to invest in Lean Hogs and Live Cattle (2024)?
Did you know that it is possible to invest in lean hogs, live cattle, and feeder cattle? In this article, we discuss how you can invest in these meat products!
How to invest in cattle?
You can find the different types of cattle that you can trade on the Chicago Mercantile Exchange:
- Slaughter pigs (lean hogs) are traded in dollars per 20 tons under the symbol HE
- Live cattle are traded in dollars per 20 tons under the symbol LE
- Feeder cattle (cows) are traded in dollars per 25 tons under the symbol GF
Cattle is traded on this exchange with future contracts. With a future contract, you will receive a certain amount of cattle delivered on a specified date. With a contract on slaughter pigs, you will receive 20 tons of animals on the expiration date.
When you are an individual investor, you do not want to actually receive 20 tons of slaughter pigs. Fortunately, there is a way to speculate on cattle without actually receiving a delivery: you can use a CFD broker.
Where can you trade cattle & slaughter pigs?
If you want to trade cattle & lean hogs, you will need an account with a CFD broker. In the overview below, you can see which brokers you can trade various types of cattle with:
| Brokers | Benefits | Register |
|---|---|---|
 | Buy cattle without commissions. Your capital is at risk. Other fees may apply. | |
 | Speculate with CFD's on increasing & decreasing prices of cattle! 82% of retail CFD accounts lose money. | |
 | Benefit from low fees, an innovative platform & high security! | |
 | Speculate on price increases and decreases of cattle with a free demo! |
Speculate on the price developments
When you speculate with CFDs on the price movement of cattle & slaughter pigs, you have two options:
- Buy: you speculate on a rising price.
- Sell short: you speculate on a decreasing price.
With CFDs, it is possible to use leverage, which allows you to open a large position with a small amount of money. Keep in mind that the risks in this case are considerable: if you use a leverage of 1:10, a drop of 10% can lead to a loss of your entire account balance.
Speculating with CFDs also entails financing costs, as you are borrowing a sum from the broker. In this article, you can read more about investing in CFDs. If you prefer to practice first, click here to open a demo.
What are slaughter pigs used for (demand side)?
- Food: slaughter pigs and cattle naturally taste delicious and are therefore used as food.
- Pharmaceutical products: lean hogs are used to make medicines.
- Other products: cattle is also used in, for example, clothing, cosmetics, and floor wax.
Where do most slaughter pigs and cattle come from (supply)?
Most slaughter pigs and cattle come from China, followed by the European Union and America. As cattle can be grown in various environments, the world is not dependent on a few countries, which provides some stability on the supply side.
What factors affect the price of slaughter pigs and cattle?
1. Food prices
The price of grain indirectly determines the price of cattle. Grain is widely used to feed cattle. When the price of grain rises, the price of cattle often decreases because farmers tend to sell them. However, in the long term, high food prices may lead to a rising price of slaughter pigs and cattle.
2. Weather
Pigs and cows, like humans, become sluggish in hot weather. When the summer is exceptionally hot, animals tend to reproduce less, which may result in a shortage of new slaughter pigs and cattle later on. When the supply decreases, the price can increase.
3. Demand from China
The demand for pigs from China is increasing rapidly. This emerging economic giant has more and more (wealthy!) mouths to feed. If this trend continues, the rising demand is likely to lead to a rising price of slaughter pigs and other cattle.
4. Exceptional situations
Swine flu or another disease can strongly influence the prices of pigs and cattle. In the past, large quantities of cattle had to be culled. As a result, the supply decreases, which may lead to a price increase.
5. Substitution by other products
The price of slaughter pigs will not increase infinitely. When cattle becomes too expensive, consumers will switch to other sources of protein, like soybeans.
Future price of cattle
The price of livestock is mainly determined by the demand side. Meat is often a luxury product that is consumed more by people with more money (vegetarian food is often cheaper). As the middle-class increases in many countries, the demand for meat will rise. It is therefore likely that the price of livestock will continue to rise in the long term.
What are the risks of investing in livestock & slaughter pigs?
- Economic downturn in China: during an economic downturn, the demand for lean hogs and livestock may decrease, causing prices to fall.
- Image: health risks & increased focus on sustainability may reduce demand for meat.
- Better technology: if farmers become better at breeding livestock, supply may increase more than demand.
Why can it be interesting to invest in livestock?
- Betting on the Chinese economy: when the Chinese economy is performing well, the price is likely to rise, which is favourable for price development.
- Diversification: by investing in different investment products, you reduce the risk of your portfolio.
- Hedging against inflation: commodities are often an excellent hedge against rising prices, allowing you to protect your wealth.
Some final investment tips
- Practice: don’t dive in right away, and practice extensively with investing in commodities first. For example, you can practice with a free demo.
- Limit risk: do not invest all your money in slaughter pigs or other types of livestock. Spread your risks and avoid unnecessary risks.
- Research: analyse what factors influence the price and try to make predictions based on your research.
Frequently asked questions about investing in meat
Most farms are privately owned, making it difficult to invest in meat-related commodities through stocks.
Investing in meat with CFDs is not suitable for beginners. Derivatives are intended for trained investors who know what they are doing.
Investing in meat/livestock is not very sustainable, but you can choose to invest in a company that produces meat substitutes like Beyond Meat. There is even an ETF now that allows you to invest in companies that produce meat substitutes.
