New pork cutout contract seen as a versatile risk management tool

News

New pork cutout contract seen as a versatile risk management tool

The CEO of the Minnesota Pork Producers sees the new pork cutout contract as a risk management tool for both producers and food retail.

David Preisler says the addition by the CME Group will benefit pig farmers, but could also help those who take the opposite position.

“Grocery stores for example that experience a lot of volatility, especially this year, in the cutout value of pigs. They went from very low during some parts of the year to just right through the roof for about 30 days, especially in May.”

The pork cutout contract goes live November 9th.

“It’ll have the exact same contract months that the current for lean hogs has. It will also be trading 40,000 pounds, so some numbers that are very familiar to farms as they look at working with the futures market.”

Preisler tells Brownfield because the contract is new, producers might want to try it out to see how it works before deciding whether to make it a part of their marketing plan.