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CME Group will launch Pork Cutout Futures and Options on Nov 9

1 October 2020, at 1:00am

Chicago-based CME Group announced it will launch Pork Cutout futures and options on November 9, 2020.

Key benefits

  • A tool for producers, packers, processors, wholesalers, importers and exporters to tailor their risk management strategy according to exposure to pork cutout values
  • An opportunity to trade the spread between Pork Cutout and Lean Hogs
  • Available for screen trading on CME Globex or block trading reported via CME ClearPort

© US Department of Agriculture

"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 which 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.

Understanding the pork cutout
Understanding the pork cutout

© US Department of Agriculture

"The National Pork Producers Council welcomes the introduction of the new Pork Cutout trading vehicle," said NPPC President Howard "AV" Roth, a pork producer for Wauzeka, Wisconsin. "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, which is a five-business day weighted average of prices reported by the US Department of Agriculture (USDA) and published in its "National Daily Pork Report Fob Plant - Negotiated Sales – Afternoon" report daily.

The new contracts will be quoted in U.S. cents per pound, will have a contract size of 40,000 pounds and will be available for trading on CME Globex or through block trades via CME ClearPort, and will be listed by and subject to the rules and regulations of CME.

The launch is pending all relevant regulatory review periods.

For more information on CME Group's Pork Cutout futures and options and the CME Pork Cutout Index, please visit: www.cmegroup.com/pork-cutout.