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Commodity Trading: Pork Belly Futures

Supply / Production Considerations

The supply of Pork Bellies is dependent on the number of hogs being slaughtered. The amount of hogs being slaughtered is the direct result of business conditions effecting the feeding of hogs. When feed prices are high, hog farmers have a tendency to slaughter more hogs because their feed costs are rising. The added supply of bellies then has a tendency to depress Pork Belly prices. During periods of low hog marketing, the supply of Pork Bellies tends to dwindle, causing prices to escalate.

Pork Belly supplies follow a contraction/expansion phase just as hog supplies do. This cycle typically lasts three to four years. As supplies increase, hog and belly prices tend to fall and hog operations curtail production. This limits the supply until eventually the price rises. As prices rise, production is increased until once again the supply is great, driving prices lower and the whole cycle starts again.

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.

Carcass Breakdown

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Note: A 250 pound Live Hog produces a 184 pound carcass

Appendix to Carcass Break-Down

Cut Name	% of Carcass	Description
A-Side	19%	13.5% Bacon Spareribs, trimmings, and fat
B-Loin	18%	Back ribs, loins, country style ribs, sirloin roasts, tenderloin, trimmings, bone and fat
C-Ham	24%	Cured & fresh hams, trimming and, fat
D-Boston Butt	8%	Blade steaks, blade roast, trimmings and fat
E-Picnic	9%	Picnic meats, skin, fat, and bones

SPONSORED BY:

Commodity Trader's Almanac 2008
Scott W. Barrie
Best Price $26.37
or Buy New $26.37

Disclosure of Risk: The risk of loss in trading futures and options can be substantial; therefore, only genuine risk funds should be used. Futures and options ARE not suitable investments for all individuals, and individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option would result in a futures position.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST 15 YEARS. THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAY IMPACT ON THE RESULTS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST, OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS. NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN THE FUTURE.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.