CME to offer new pork contract

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CME to offer new pork contract

The Chicago Mercantile Exchange will offer pork cutout futures and options contracts starting November 9th.  

Steve Meyer, an ag economist with Iowa based Partners for Production Agriculture, says a pork cutout contract is more viable now than in previous years because historically, cutout value and the lean hog index were tightly correlated. He says that is no longer the case.  

“My concern was that introducing a new contract might rob volume and open interest from the lean hog contract and make that a less liquid contract, one that’s harder to get into and out of,” Meyer said.

He said the two can now work as separate contracts and serve different purposes…  

“To hedge hogs and to hedge cuts, or the cutout value in the wholesale market and maybe manage the spread or manage basis even in some cases,” he said. “Then, I could see that they’d both be quite useful.”  

Meyer says the new contract will trade on the same months as the lean hogs contract and the first listing will be for December. The traded months are February, April, May, June, July, August, October and DecemberHe says the contract size will be 40,000 pounds. 

Meyer made his remarks during the Quarterly Hogs and Pigs report call hosted by the National Pork Board.  

Meghan Grebner contributed to this article.

Steve Meyer on New CME Contract

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