What it is:
How it works/Example:
Pork bellies are a commodity of pork products traded as a futures contract on the Chicago Mercantile Exchange since 1961. The unit of the commodity is 20 tons of frozen, trimmed bellies. Pork bellies are able to be flash frozen after slaughter and held for a long time in storage. The prices of the futures contracts for pork bellies depend on the inventory and the season demand for pork products, which can be quite predictable.
Why it matters:
Because of the cyclical nature of the demand for pork products in a variety of strong U.S. and international markets, the purchase (and sale) of pork bellies futures can be a reliable investment strategy. It is very similar to the way natural gas futures tend to rise right before winter, when traders expect the demand for heat (for homes and businesses) to increase.