How to Invest in the Best Commodity of 2013

Email

It's been hog heaven for commodity traders who have pigged out on pork – the best commodity of 2013.

Indeed, the $12 billion hog-futures market has gained 19% year-to-date, making it the biggest gainer among commodities in the Dow Jones Commodity Index, which fell 9.9% in the period.

Robust consumer demand, tight supplies and favorable prices compared to beef – which hit record retail prices this spring – were behind pork's healthy gains.

From January to April, pork sale volumes rose 4.3% from a year ago at 18,000 retail outlets tracked by market research firm Nielsen Co. In comparison, beef volumes dipped 1.9% and chicken volumes inched up a mere 0.2%.

Pork: Best Commodity of 2013's First Half

Pork trading volumes have also notably risen.

For the first time ever in the hog contract's 50-year history, the number of bets on lean-hog futures held by traders and investors were more than those for live cattle.

Last Thursday, hog futures finished at $1.01, just shy of their nearly two-year high of $1.20 a pound hit on June 14.

With a cache of commodities lagging, from gold – which has lost its luster to coffee and could use some perking up – money managers are poking around the hog market in a hunt for yield.

"Everybody's happy and making money and having fun," Dennis Smith, a Chicago-based broker for Archer Financial Services told The Wall Street Journal. "The U.S. consumer doesn't want beef anymore."

In the U.S., pork has long been regarded as a lesser quality alternative to beef. However, that's not the case in the rest of the world where pork enjoys equal footing with beef.

Hog futures traders were as happy as a pig in mud last month when Smithfield Foods Inc. (NYSE: SFD), the world largest pork processor and hog producer, agreed to be taken over by China's Shuanghui International Holdings Ltd. If approved, the $4.7 billion takeover would be the biggest Chinese takeover of a U.S company.

It's not just increased demand pushing prices higher…

Join the conversation. Click here to jump to comments…

Leave a Reply

Your email address will not be published. Required fields are marked *


4 + = nine

Some HTML is OK

© 2014 Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201, Email: customerservice@MoneyMorning.com