The pork belly is in danger of going belly-up... just six contracts changed hands in the month of November—fewer than uranium or palm oil. The once-bustling pork-belly pit has been moved to a corner of the CME's floor, an appendage to the lean-hog-trading pit.There are several reasons, but a big one is that
Financial traders have largely shunned the contract because it requires buyers to take possession of massive quantities of meat.It seems even small-scale market participants appreciate this dynamic:
"For a contract to be successful, you have to have fund participation" from hedge funds and commodity funds, said Dan Norcini, an independent livestock trader in Idaho who has been trading commodities for more than 20 years. "There're not enough volumes for them to move in and move out." Mr. Norcini stopped trading pork bellies about three years ago.The moral of the story, as usual, is that “speculators” provide liquidity and liquidity is by and large a good thing.