Explore Topics and Trends impacting today's markets

With their favorite restaurants closed last year, Americans snapped up steaks, burgers, and pork chops to cook and serve at home. This reinforced what has been known for a long time: Americans want their meat whether they’re dining out or at home.

That’s not to say 2020 was easy for those involved in the meat trade. Everyone from the livestock producer to the retail grocer endured unprecedented turbulence. CME live cattle futures tumbled and touched a 14-year low at 76 cents a pound in April 2020. Similarly, CME lean hog futures also bottomed out at 37 cents a pound in April 2020, touching a price level not seen since 2002.

Meanwhile, wholesale beef and pork prices went the opposite direction. The boxed beef cutout surged to a new all-time high above $475 per hundred weight (cwt) and the pork cutout notched a high of $117 cwt in May. The pandemic and its resulting supply chain disruptions presented the most extreme example of how the prices for hogs and cattle and those of beef and pork may at times follow similar patterns, but they are not at all the same.

 

Supply and demand patterns of recent years underscore the need for additional pricing tools. That’s the rationale behind CME Group’s Pork Cutout futures and options that first launched in November 2020. Since launch, Pork Cutout has attracted active daily trade and open interest in every contract month out through February of 2022.

Additionally, CME began publishing the new Boxed Beef Index, which tracks the prices paid for beef. Just as the Pork Cutout Index was created in 2015 to provide a new pricing tool for the marketplace, there is hope that Boxed Beef can evolve to become the benchmark price reference for beef. 


 

 

OpenMarkets is an online magazine and blog focused on global markets and economic trends. It combines feature articles, news briefs and videos with contributions from leaders in business, finance and economics in an interactive forum designed to foster conversation around the issues and ideas shaping our industry.

All examples are hypothetical interpretations of situations and are used for explanation purposes only. The views expressed in OpenMarkets articles reflect solely those of their respective authors and not necessarily those of CME Group or its affiliated institutions. OpenMarkets and the information herein should not be considered investment advice or the results of actual market experience. Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. BrokerTec Americas LLC (“BAL”) is a registered broker-dealer with the U.S. Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (www.FINRA.org), and is a member of the Securities Investor Protection Corporation (www.SIPC.org). BAL does not provide services to private or retail customers.. In the United Kingdom, BrokerTec Europe Limited is authorised and regulated by the Financial Conduct Authority. CME Amsterdam B.V. is regulated in the Netherlands by the Dutch Authority for the Financial Markets (AFM) (www.AFM.nl). CME Investment Firm B.V. is also incorporated in the Netherlands and regulated by the Dutch Authority for the Financial Markets (AFM), as well as the Central Bank of the Netherlands (DNB).

©2022 CME Group Inc. All rights reserved