CME Group announced Sept. 29 that it will launch pork cutout futures and options on Nov. 9, 2020, pending all relevant regulatory review periods.
"As the market has evolved, our customers continue to look for new tools to manage the price risk associated with hog and pork production," said Tim Andriesen, CME Group managing director of agricultural products. "The pork cutout futures and options are complementary to our lean hog contracts and will provide clients with the ability to manage risk and discover price from the hog all the way to the meat case."
Hogs are increasingly bought and sold in the physical market based on a formula that uses the cutout. The pork cutout reflects the approximate value of a hog calculated using the prices paid for wholesale cuts of pork. The values, or cuts, used to calculate the pork cutout include the loin, butt, picnic, rib, ham and belly. The new contracts reflect the price of the wholesale product after processing.
National Pork Producers Council (NPPC) president Howard "AV" Roth, a pork producer from Wisconsin, said NPPC " welcomes the introduction of the new pork cutout trading vehicle. We applaud CME Group for providing another risk management option, in addition to the lean hog contract, and for enhancing market visibility, which is so important to maintaining a highly competitive and innovative pork production system in the United States."
Pork cutout futures and options will be financially settled to the CME Pork Cutout Index, a five-business day weighted average of prices reported by the U.S. Department of Agriculture and published every day in its "National Daily Pork Report Fob Plant -- Negotiated Sales – Afternoon" report.
The new contracts will be quoted in U.S. cents per pound, will have a contract size of 40,000 lb., will be available for trading on CME Globex or through block trades via CME ClearPort and will be listed by and subject to CME rules and regulations.
For more information on the CME pork cutout futures and options and the CME Pork Cutout Index, visit www.cmegroup.com/pork-cutout.