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How to Invest in the Best Commodity of 2013

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…

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