Agricultural

New Fresh Bacon Index Served Up by CME Group

Posted 05/16/2019 10:03AM CTJoe Nikruto

Bacon IndexWith the other ‘white meat’ in the news as it has been recently the launch of the new CME Fresh Bacon Index couldn’t come at a better time. The ongoing crisis that is African Swine Fever is wreaking havoc on Asian, specifically Chinese, pork production. China, both the world’s largest producer and consumer of pork is being hit especially hard by ASF.  Difficulty with reporting and containment in China’s rural areas is making management of this crisis a process that could impact agricultural markets for years to come.

Back here in the US pork consumption is flying high, especially when it comes to bacon. Has there been a time in history where bacon has been more popular? With the ascendance of high, or at least higher, fat diets such as Keto, Paleo or Carnivore, and novel marketing bacon has been and continues to be a red-hot popular, even fashionable food item.  As individuals our need for information regarding bacon can be limited to where the best sale is or what craft beer to pair it with at our next social function.   For other market participants, like this list taken from the CME Group press release for the new Fresh Bacon Index, such as “producers, packers, processors, wholesalers, foodservice, retailers and others across the bacon supply chain” the need for a transparent price reference is more pronounced.

In 2011 CME Group delisted the Frozen Pork Belly futures contract. Over time, the type of pork belly demanded by consumers and traded on the cash market shifted, and the frozen contract no longer represented an effective hedging instrument. The new Fresh Bacon Index will provide market participants “with a transparent weekly price to track supply and demand dynamics of bacon transacted on the cash market” according to the CME Group’s press release.  CME Group does not currently have plans to launch a bacon or pork bellies futures contract. Right now, the exchange is focused on making the CME Fresh Bacon Index the bacon price reference. CME Group is making five years of index data available on the website with updates to arrive every Monday going forward. 

Joe Nikruto

Joe Nikruto attended Indiana State University and DePaul University in Chicago with a major concentration in economics. "It was during college that I got a job as a runner at the Chicago Board of Trade. I was immediately hooked," he says.He adds that he also enjoys futures trading because anyone can do it. "Your success depends on how you handle the risk and how much work you are willing to put in. You don't need a big-time Wall Street connection, or a degree from an Ivy League school to get started. Your success largely depends on you and what you put into it." In 1992, he started as a runner and back office clerk for a very large futures commission merchant (FCM). He moved up to pit clerk, then research associate working on the trading floors directly for a grain and livestock concern based in Memphis. He spent time on various trading desks for a large retail FCM and then became Series 3 registered in 1997. He also helped develop an online trading platform and consulted on development and trading of mechanical trading systems. He has always worked to assist his clients with all types of trading-from option strategies and hedging to complicated mechanical trading systems. His advisory background includes Floyd Upperman, McMaster, Walter Bressert, Ken Roberts, Tech Guru, Hightower, Helms and Barry Rosen. As for his involvement with RJO, Nikruto says, "R.J. O'Brien has been in operation for more than 100 years. That is a century of supporting customers. You have to be doing something right for folks who use futures to choose to do business with you for that long."