While many people are familiar with the term "pork bellies" being used in some way with futures trading, not everyone is aware that the commodity actually does involve the belly of the pig. As the name implies, it is a cut of meat that comes from the underside of the pig or hog. Pigs actually have two stomachs that may weigh 10 to 18 pounds (4.5 to 8 kg) each. These bellies are usually cut into long thick sections, and are flash frozen. Once frozen, they can be kept for quite a long time and still be used as a food source. American, Korean, and Chinese cuisine use the pork belly after it has been marinated or prepared in other ways.
Pork belly futures have their origin with the Chicago Mercantile Exchange, and have been actively traded on the Exchange since 1961. Trading in these futures is based on the projections of current supply versus the current rate of demand for the product. The current worth of these future commodities rests in who wants them and how much of the product is considered desirable at the present time. Currently, the basic trading unit is 20 tons of trimmed and properly frozen belly portions and segments.
The value of pork bellies will rise, sometimes at a spectacular rate, when an increased market for bacon is perceived to be on the horizon. To a degree, the demand increases during seasons of the year when consumers are looking for lighter meat alternatives that are quicker to prepare and don't weigh the eater down during the activity of the warm weather months. The demand tends to decrease during colder months, when meats other than bacon may be considered preferable. That is one reason why reserves may be relatively low as the final quarter of the calendar year begins, and there is a slight rise in the cost of what is left.
As the new years begins and production and freezing of pork bellies gears up to meet summer demands, the value of the commodity may reflect the change in inventory. There are those that routinely sell futures when the prices is higher, then buy them back when the price dips based on supply and climate changes.
Speculation in pork bellies futures trading is considered to be a relatively stable component of an investment portfolio, as well as one that can yield a high profit if the investor has the vision to buy and sell at the proper times. As an ongoing renewable part of the food supply, this is one commodity that will likely be a good investment for many years to come.
