Lean hog is one of the most popularly traded commodities among investors who are looking to diversify their portfolio.
The global pork industry has observed a significant rise in the past few years. The consumer demand for pork is higher than any other animal protein. Every year, over hundred million metric tons pork is consumed across the globe.
Businesses and investors involved in the yield and distribution of pork utilize the lean hog futures or options strategies to manage risk. Therefore, lean hog holds significant importance among investors and businesses in the food commodity industry.
Here are some reasons why investing in lean hogs can be an excellent decision for your portfolio.
Chinese Demand Surge
The sharp rise in pork’s demand from China makes 2020 the best time for lean hog investment. In the past few years, Chinese imports have increased to the point that it has begun tightening pork supplies across the globe. If this trend continues, we’ll be facing a supply shortage for pork in no time. Higher demand and reduced supply will also lead to a surge in the prices of lean hog.
According to the agricultural economist at Purdue University, Chris Hurt, “We’re currently seeing so far this year in 2017, 15 percent more exports of pork, and it’s all going to foreign consumers. Strong demand is how we would explain the situation of more supply but even higher prices.”
Of course, the economic situation in China will remain the most significant determinant of pork demand. However, it must noted that pork has been the most favourite animal protein for decades for the Chinese population, which means lean hogs market may have lower demand elasticity than other meat markets, such as poultry, beef, sea food, etc.
An Excellent Hedge Against Inflation
Lean hogs investment is an excellent hedge against economic inflation and the resulting loss of finances to purchase livestock.
The prices in the livestock market tend to rise whenever the global economy is shaking. The interest rates have been further reduced by the central banks and Federal Reserves, which has led to lots of uncertainty in all the asset classes, including cryptocurrencies, equities, and high-yield debt.
Stock markets are already crashing ever since the coronavirus emerged. Amid all the broken markets, the food market continues to thrive. The COVID-19 pandemic has changed the way people used to do grocery shopping. They’re now stockpiling staple foods in their homes, in case the stores go out-of-stock. If these purchasing patterns and economic inflation continue to heat up, food commodities, including lean hog, will see magnificent price gains.
Diversification of Your Investment Portfolio
When it comes to investing, you should never keep all your eggs in one basket. Your investment portfolio should be a balanced combination of bonds, stocks, assets, and commodities. Considering the expected rise in demand and prices of lean hog, it may be the best food commodity for diversifying your investment portfolio.
Futures trading comes with high risk, but even higher returns. If you’re looking to invest in lean hog, you need to have a good understanding of the risk management marketing and lean hogs marketing.
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