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    Pork Bellies August 2010 (PDQ10)

    144.000unch (unch) 7:06P EST (CME) View Help
    Commodity Price Quote as of Friday, May 25th, 2012

    Contract Specifications

    Symbol PD
    Name Frozen Pork Bellies (GPB)
    Exchange CME
    Trading Months February, March, May, July, August (G, H, K, N, Q)
    Trading Unit 40,000 lbs
    Tick Size 2.5 cents per cwt. (100 lb)($10.00 per contract)
    Daily Limit 2 cents per lb. ($800 per contract)
    Trading Hours Globex 9:05a.m. - 4:00p.m. Mon, 5:00p.m. - 4:00p.m. Tues-Thurs, 5:00pm - 1:55p.m. Fri CST
    Last Trading Day The business day immediately preceding the last three business days of the contract month
    Value of one futures unit $400
    Value of one options unit $400

    CRB Yearbook Description

    Pork bellies are the cut of meat from a hog from which bacon is produced. A hog has two belly slabs, generally weighing 8-18 pounds each, depending on the hog's commercial slaughter weight. Total hog slaughter weights average around 255 pounds, equal to a dressed carcass weight of about 190 pounds. Bellies account for about 12% of a hog's live weight, but represent a larger 14% of the total cutout value of the realized pork products. Pork bellies can be frozen and stored for up to a year before processing. The pork belly futures contract at the Chicago Mercantile Exchange calls for the physical delivery of 40,000 pounds of frozen pork bellies, which have been slaughtered at USDA federally inspected slaughtering plants. Each deliverable belly typically weighs 12-14 pounds each.

    There are definite seasonal patterns in pork belly prices. Bellies are storable and the movement into cold storage builds early in the calendar year, peaking about mid-year. Net withdrawals from storage then carry stocks to a low around October. The cycle then starts again. Retail bacon demand also follows a time worn trend, peaking in the summer and tapering off to a low during the winter months. While demand patterns would suggest the highest prices in the summer and the lowest in the winter, just the opposite is not unusual. Such contra-seasonal price moves can be partially attributed to supply logistics, notably the availability of frozen storage stocks deliverable against futures at CME exchange-approved warehouses. When stocks prove either too large or small, the underlying demand variables for bacon can be relegated to the backburner as a market-moving factor. The fact that no contract months are traded between August and the following February adds to the late fall futures price distortion.

    Belly prices (cash and futures) are sensitive to the inventory in cold storage and to the weekly net movement in and out of storage, which affords some insight to demand, although a better measure is the weekly quantity of bellies being sliced into bacon. Higher retail prices tend to encourage placing more supply into storage because of lower retail bacon demand. Bacon is not a necessary foodstuff so demand can be buoyed by favorable consumer disposable income. However, dietary standards have changed dramatically in recent years and do not favor the consumption of high fat and salt content food, such as bacon. In addition, alternatives to pork bacon have emerged in recent years such as turkey bacon, which has lower fat and calorie content.

    Prices - Pork belly futures prices fell sharply during 2009 due to the recession and weak demand and due to the H1N1 swine flu scare, which started to emerge in spring 2009. The swing flu scare caused US pork exports to plunge and caused domestic supplies to back up. Pork belly prices in August 2009 plunged to a 10-year low of 38.50 cents per pound. Pork belly prices then rallied going into late 2009 as pork exports started to recover and as supplies tightened up.

    Supply - The average monthly level of frozen pork belly storage stocks in 2009 fell by -0.1% to 60.880 million pounds, down from the 2008 10-year high of 60.932 million pounds. As of December 2009, there were 44.638 million pounds of pork bellies in storage.

    Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.
    More commodity data from Commodity Research Bureau.