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LH · Lean Hogs ·Bridge of Death · Your Fate
Napkin Math
Let’s run the numbers.
The arithmetic
Rough estimate
| Retail pork purchase | $100.00 |
| Live 285-lb hog at CME Lean Hog Index ($85/cwt) | $242 per hog |
| Carcass yield (285 lb × 75% dressing) | 214 lb carcass |
| Retail cuts (70% of carcass) | 150 lb retail |
| Retail revenue per hog (150 lb × $5.50) | $825 |
| Farm share (farmgate ÷ retail) | $242 ÷ $825 = 29% |
| Dollars reaching the farmer | $100 × 0.29 |
| Farmer’s cut of $100 | $29 |
Why this matters
The scene is a grocery receipt. The market is the pork crush.
Pork’s lower farm share compared to beef is a direct consequence of the 1998 vertical integration wave (see Q07). When Smithfield, Tyson, JBS, and Seaboard bought the independent-farmer wreckage after the 1998 crash, pricing power shifted from the farmer to the packer-producer. In beef, ranchers still own the cow-calf operation and keep more of the value chain. In pork, the packer owns the pig in most cases.
What matters for the Lean Hogs trader is the pork cutout minus lean hog spread. USDA-AMS publishes the daily boxed-pork cutout at 2 p.m. Central every weekday. The cutout minus the CME Lean Hog Index is the packer-margin thermometer. When that spread fattens, the packer is winning, the farmer is losing, and CME Lean Hog futures tend to lag cash cutout for weeks before catching up.
The pork cutout minus lean hog spread is the single best short-term directional signal in Lean Hog trading. When it widens, LH futures underperform cutout. When it compresses, LH futures catch up fast. Watch the 2 p.m. Central cutout before you watch the futures.
USDA-AMS, National Daily Pork Report, methodology, 2024
For a Lean Hogs trader, the practical implication is that farm share is a political thermometer and the cutout-LH spread is the trading signal. When pork farm share compresses to the low 20s, political pressure follows: Congressional hearings on packer concentration, DOJ probes, Fair Hog Marketing bills. When it expands toward 35, the packer-producers are the ones calling the banker. The farm share metric drifts quarterly. The cutout-LH spread moves daily.
The question is a thought experiment. The $30 of every $100 is a trader’s reminder that pricing power in pork sits with the packer, not the farmer.