Why Livestock ETFs Became the Quiet Winner When Stock Markets Stumbled in 2014

The year 2014 exposed a harsh truth: traditional equity markets were essentially going nowhere. The S&P 500, Dow Jones, and Nasdaq spent most of their time either treading water or dipping into negative territory. While growth-hungry investors watched their momentum plays collapse, an unexpected opportunity emerged from a completely different corner—livestock commodities.

The Perfect Storm in Cattle and Hog Markets

What triggered this livestock ETF rally? Three words: supply meets demand imbalance.

U.S. beef prices climbed to a 27-year peak, their highest level since 1987. The culprit wasn’t mysterious—it was straightforward supply-side pain. A severe drought in Texas (responsible for over 80% of U.S. cattle production) forced ranchers to send cattle to market earlier than planned back in 2012. While this temporarily suppressed prices that year, the subsequent shortage created the opposite effect: skyrocketing beef prices throughout 2013 and into 2014.

The numbers tell the story clearly. According to USDA projections, the U.S. cattle herd had contracted to its lowest level in 63 years by 2014. With fewer cattle available but stronger international demand from countries like China and Japan, consumer beef prices were expected to jump 3-4% for the full year. The $85 billion beef industry faced its tightest supply conditions in two decades.

But beef wasn’t alone. Pork prices moved higher alongside it, driven by an entirely different crisis: porcine epidemic diarrhea (PED) ravaged pig farms across the Midwest. This virus decimated young pig populations, pushing hog futures to record levels. By mid-March 2014, lean hog futures hit $1.33425 per pound—up nearly 47% year-to-date and roughly 25% from the previous May’s lows.

Three Livestock ETN Products Worth Considering

For investors seeking exposure to these surging prices without directly trading commodity futures, three livestock ETF options provided practical entry points:

iPath Dow Jones-UBS Livestock Subindex Total Return ETN (COW) delivered the strongest year-to-date performance at 14.19%. This structure allocates 60% to live cattle futures and 40% to lean hogs, with annual fees of 75 basis points. The fund had accumulated $53 million in assets with daily trading volumes under 30,000 shares, indicating potentially wider bid-ask spreads for execution.

UBS ETRACS CMCI Livestock Total Return ETN (UBC) offered a similar allocation (60% cattle, 40% hogs) through its UBS Bloomberg CMCI index exposure. The product charged slightly lower fees at 65 basis points annually and matched COW’s year-to-date gains at 14.2%. However, its $5.8 million asset base meant even thinner liquidity at 26,000 daily shares traded.

iPath Pure Beta Livestock ETN (LSTK) took a different methodology approach using Barclays’ Pure Beta framework for rolling futures contracts. With a 55/45 cattle-to-hogs split and identical 75 basis point fees, this product lagged its peers with a 9% year-to-date return. Its $2.8 million AUM represented the smallest fund in the livestock ETF category.

The Critical Caveat

While the fundamentals supported higher livestock prices in 2014, investors needed to understand the risk profile. Futures-based ETNs carry amplified volatility compared to equity holdings. More importantly, these investments hinged entirely on current supply disruptions persisting. Any normalization in cattle herds or containment of PED would reverse the tailwinds driving prices higher.

Additionally, a strengthening U.S. dollar—likely to follow economic acceleration—typically pressures commodity valuations across the board, potentially dampening appeal for the broader livestock ETN sector.

The Bottom Line

Livestock ETFs presented a tactical opportunity for portfolio diversification during a flat equity market environment in 2014. Investors specifically targeting exposure to cattle and hog price appreciation had three legitimate vehicles, each with distinct liquidity and fee characteristics. However, commodity futures investing demands higher risk tolerance and clear exit strategies when market conditions shift.