Lean hogs are the best-performing commodity this month as ravenous US consumers pig out on their beloved bacon, lettuce and tomato (BLT) sandwiches.
It turns out pig futures prices can fly, with a 12.1 per cent increase in the last month, outperforming almost every other major commodity, according to analysis by ETF Securities.
The price of lean hog futures for August delivery has risen from below 70 cents per pound in April to highs of 85 cents per pound earlier this month, according to CME Group.
Seasonal demand for bacon is the big driver, according to ETF Securities. Its analysts write: “Demand for lean hogs is at peak, benefiting from the BLT season in the US.”
City A.M. has been unable to verify the correlation in price movements of lettuce or tomatoes. Mayonnaise is not generally traded on the open market.
The price for lean hogs has surged to around 40 per cent higher than its 200-day moving average, well above the next strongest commodity, wheat. However, traders entering the market now may be buying a pig in a poke, with demand expected to fall.
Over the course of the last three months lean hog prices have increased 48.5 per cent. An investment in the S&P 500 US equity benchmark index would have returned an investor just over five per cent.
However, investors looking to bring home some quick bacon have to contend with high volatility on meat futures markets. Hog prices usually peak around June or July, while corn prices (the main feedstock for livestock) can also influence the prices of lean hog futures by changing the vital corn/hog ratio – a measure of the profitability of raising livestock.
Demand for bacon in America has increased steadily in recent years. According to market research firm Nielsen, Americans bought 14 per cent more bacon during 2016 than they did in 2013.
Lean hogs are the main unit of transaction for pork markets, with a single contract accounting for 40,000 pounds of pork, or around 18 metric tons.