Trading in Pork. Yes Please.

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It may not be news to anyone but I have no clue about trading. To me, the stock exchange is a big building downtown with one of the larger American Flags hanging outside. In fact, have you ever read any analysis of the current economic climate on this blog? You have not. Indeed, I avoided Occupy Wall Street like the Plague for fear of having to discuss something out of my comfort zone (please do not then assume that my comfort zone consists mainly of sugar consumption and performance opportunities. This blog focuses on the trivial yes, but also the more serious adventures of my current life).

But one thing I have learned during my time here in the Big Apple is that pork is a commodity (could I have unearthed a subconscious link underlying the city: it is a known fact that pork and apple are so finely partnered!). Take Momofuku for instance. Pork Belly Bun aka Pork Bun (see below). Truly, gobsmackingly irresistible.

Let me first state, for relevance purposes: I came to this city as an ‘almost veggie’. I was near prepared to give up on meat entirely, finding that I very rarely craved a wedge of lamb, a slab of beef or a pulled shoulder of pork.

Sunday Roast? Urh…. I’d take it or leave it (after first scoffing the Yorkshire Pudding that is). But now one year in and I am the carnivore I clearly always dreamed of being. I am a meat monster. I have no shame in admitting that I have frequented Momofuku Noodle Bar on numerous occasions, perhaps too many to count. I now willingly wander into barbeque establishments and order from the menu, always leaving juicy, meaty, greasy sauces dripping from my chops. I hunt out the best burgers in the city (see The Spotted Pig and The Breslin) and I consume chicken (but not turkey. Turkey is a cheap meat), as if the chicken world were in peril.

But most surprising, for me (as no one is asking you to consider this too deeply), is that my love of pork is off the scale. The pork adoration scale. Last night I adventured to Brooklyn’s Fette Sau, for no other verb will do, and devoured most of a pork’s shoulder. Did I stop for breath? I certainly did not. Upon discussing this realisation with a certain mother, being the only human disposed to listen to my ravings, I was further amazed to learn that pork has a long-time connection to the trading market. And for that I felt like it may serve to boost the intellectual property of my blog.

So, for the factual bit:

Pork Bellies, or the cured carcass of a slaughtered pig, usually account for roughly 13.5 percent of the carcass weight of the hog.  The belly is removed from the carcass and cured in a heavy salty brine solution and put in cold storage to eventually be sliced into bacon.  Bacon, the end result of the pork belly, is unique among meat products in that it has no substitutes.  The major factor effecting Pork Belly prices is the number of hogs being slaughtered and the demand for bacon.

The most important factor affecting the supply and price of Pork Bellies is the current live stock situation: feed costs and profitability considerations, the number of hogs and pigs on farms, and the birth rate of new pigs.  Other important supply considerations are weekly hog marketing at major markets and cold storage figures.

First and foremost, it is best that you understand exactly what it is you’re trading, traders:

pork bellies:

  1. trade 40,000 lbs of frozen cut-and-trimmed pork per contract.
  2. have a minimum “tick” size of 2.5¢ per hundredweight, or $10.00.
  3. trade on the floor from 9:05am to 1:00pm Central.
  4. have contracts in the months of February, March, May, July, and August.

lean hogs:

  1. trade 40,000 lbs of lean hog carcasses per contract.
  2. have a minimum “tick” size of 2.5¢ per hundredweight, or $10.00.
  3. trade on the floor from 9:05am to 1:00pm Central.
  4. have contracts in the months of February, April, May, June, July, August, October, and December.

It is important to understand the above information when trading as it is all fundamental; no one wants to be embarrassed!

Trading pork bellies and lean hogs – apart from the fact that they are separate markets with individual specifications – is not too different from trading anything else. Many markets have basic trading seasons in which certain products are produced and/or sold in higher quantities than in other times of the year. While it may seem simple to follow this seasonal trend, it is not quite as simple as buying during one point of the year and selling during another. Certain reports that come out (for pork bellies and lean hogs, a very important report is Hogs and Pigs, as distributed by the USDA quarterly) may provide critical information that may help you with your decision-making when the time comes to trade. Most importantly, never feel rushed; just because a news headline informed you that there was a small outbreak of disease among hogs in China or that pig production in the Midwest is slowing, there is no reason to act hastily. Always do your due diligence by checking and double-checking everything you see and hear!

The summer driving months from Memorial Day to Labor Day marks the height of fast food consumption, and the height of bacon consumption.  The period is known in Pork Belly circles as the BLT season.

The fast food industry is becoming increasingly more important to the demand for Pork Bellies.  As these behemoths of the food industry feature bacon on a sandwich, the demand for bacon increases dramatically.  With the introduction several years ago of breakfast menus to the fast food chains, such as McDonald’s, Burger King, Wendy’s, and the like, the fast food industry has become an ever increasing consumer of bacon and Pork Bellies.  Since the busiest time of the year for the fast food industry is during the summer season, it is no surprise that this traditionally strong demand period sees the largest number of bellies moving out of cold storage for slicing than any other season of the year.

data courtesy of http://www.commodityseasonals.com/pork_belly_futures_1.htm and http://www.bellycommoditytrading.com/different-ways-to-trade-bellies.html

And if you got to the bottom of this mammoth blather of pork-related information I have probably put you off. But I urge you. Pork is making it big in the city. Go find some.


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