I had two courses in college where we had $10,000 dollars on paper and had to invest the money (on paper) in the Futures Market in Agriculture Commodities. At the end of the six weeks we had to let the class know how much we made. Both times I made just over $1,000,000. The closest anyone else came was a good friend when we took one of the classes together. He also made over a million but was slightly under me. The next closest student in both classes was $250,000. The friend and I worked together on reading information on the agriculture markets and then made trades based on our discussions together. The one thing I understood was how the speculators entered the market and exited the market. I understood how emotions could drive the market, too. Back then we didn't have instant communication as we do now. We had to do all of our trades based on a one day delay via the Wall Street Journal. I loved this particular exercise in these classes.
Pork prices are down. How is it determined. First the Futures Markets for Agriculture Commodities for the most part are traded on the CBOT and CME. From my classes I stayed clear of Pork Bellies. This was the only way back in the '80's that Pork was traded. Pork Bellies were just too volatile for me. Since then Lean Hogs have been added.
Pork Bellies is the way to trade Bacon. Yeah, funny name to me. Lean Hogs is the other instrument to trade Live Hogs. Late last night I took a look at the prices. Hog producers were already reeling from the high grain prices of last year. The outlook for prices and making money for this year was dismal at best. Now enter the current flu virus. Pork prices have tumbled severely. This is such a blow to the producers. If I had the money late last week when the virus hit the news, I would have sold contracts in one or both of the instruments to market hogs. This morning I would have purchased contracts to exit the market and made a boat load of money.
On April 23, Pork Bellies closed about $83 dollars from the charts I read. Yesterday they closed at 75.875. Lean Hogs on April 24 closed at just under $74 from the charts. Yesterday it closed at 69.17 and currently are trading at 10:50 am at 68.300. Some of this is speculation and institutional driven. But, it is based on the falling purchases by consumers of pork in the grocery store. On a Lean Hogs contract that is a profit of almost $2000 per contract in five days.
If you want to help producers please buy pork. You will not get the flu from eating pork!