Doctor Eclectic

Doctor Eclectic
Doctor Eclectic

Tuesday, August 2, 2011

Things I Learned, Which May or May not be True

Even at my advanced age, I try to learn something new every day, and, as I am wont to say, if I can do it before noon, it frees up my day. But sometimes I am befuddled as to whether what I learned is true or not. Such is the case of my new-found knowledge of pork bellies.

Last week I was fascinated by a report on NPR, a trusted source for me on things to learn, that for the first time in more than one hundred years, you could not trade in the future of pork bellies.

Now I grew up in Iowa at a time when every noon we had a report on the radio that, among other topics, mentioned what pork bellies were trading for. Pork Bellies?

Until about a year ago I had no idea what a pork belly was. Then, through a connection with the American Institute of Wine and Food, , I learned that, when a chef gets caught up in using all parts of an animal, two of the ingredients he or she has to deal with are pork cheeks and pork bellies. The former was served to me as part of a fresh vegetable ratatouille, lightly braised and delicious. The latter I learned was uncured bacon.

For those of you unsure what commodity trading is, I’ll share my understanding of one of the busiest marketplaces in the financial world, the Chicago Mercantile Exchange, right next to the Tribune building and close enough to the Chicago River that you could see the green dye on St. Patrick’s Day.

The operative word is Futures. People will speculate on the cost of a grain or other commodity by setting a guaranteed price to buy it in the future. One doesn’t know what the volume (yield) will be, what the weather will be, and how many people will plant the commodity based on the guaranteed price. The guarantee is a conservative bid. The hope is that there will be demand at the time the crop goes to actual market that forces the price above the guarantee, making the investor a profit.

Pork bellies (primarily used in the past for bacon) were especially sensitive to the cost of their feed. Maybe because the price of corn has been so high, and the yield of corn has been so high (go figure), there was just too much unknown. Or, as the NPR article inferred, bacon ceased being seasonal. Pork was traditionally a spring slaughter commodity. When refrigeration came in the seasonality became less and today, with transportation, including refrigerated transportation so common and relatively inexpensive, the variation from bid to market made potential profit not worth the risk.

So, you can still buy futures in wheat and corn, beans and soy beans, but, if NPR was correct, no longer in pork bellies.

My friend, Joe, who for a time was a butcher before he became an Endodontist, tells me he doesn’t believe it. He may be correct, but I already had this in my mind as a topic for my Blog.

Next Blog I think I’ll discuss my recent and past experience with Borders.

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