What is Pork Belly?
Pork belly is a cut of pork that comes from the belly of a pig. Pork bellies were first traded on the Chicago Mercantile Exchange in 1961. This allowed meat packers to hedge the pig market. Pork bellies began to be traded in the futures market, as they are an important component of meat products such as bacon.
Uses of Pork Belly
Pork belly in its sliced form is more commonly known as bacon. Bacon is included in the staple diet of many nations around the world, mainly the western culture.
Risks Pork Belly
Like any futures contract, there is always the possibility that the underlying asset i.e. pork belly will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of pork belly to rise), if this were to happen and the pork belly fell in price, your long position in pork belly will decrease in value.
Like any livestock, the inherent risk of disease. Weather conditions such as droughts, floods or cyclones can effect the production levels of pigs.