In free market economies, supply and demand is the primary enabler for price movement. Any outside forces that affect supply and demand eventually affect prices. When you are considering a trade in the pork bellies market some of the basic fundamentals that you should consider are:

1. Hogs The supply of pork bellies is dependent on the number of hogs being slaughtered. When feed prices are high, hog farmers have a tendency to slaughter more hogs because their feed costs are rising. The added supply of bellies then has a tendency to depress pork belly prices. During periods of low hog marketing, the supply of pork bellies tends to dwindle, causing prices to escalate.

2. Bacon Demand for pork bellies is a direct result of the demand for Bacon. Bacon, or processed and sliced pork bellies, is the only member of the meat industry that has few competing products. The demand for bacon is directly influenced by broad macro population influences, such as income levels, population growth, and consumer tastes. The population influences on pork belly demand are slow to change, so the demand for pork bellies and bacon are relatively static from one year to the next. Historically, pork belly futures have risen in value the most during cold winter months when bacon is consumed most.

3. USDA Reports You can estimate the future amount of hog production by monitoring the USDA Hogs and Pigs Report. If the amount of newborn pigs are lower than previous quarters, it is likely the hog production will be lower six months later when they are ready for market.

4. China The emergence of China onto the world economic stage has many implications for U.S. hog producers. As China makes its transition from a developing economy to a developed one, the world will notice that 20% of its population is becoming wealthier, demanding more goods, and eating more high quality food. Pork, being the primary meat in Chinese diets, will face a demand surge.

These are just some of the basic fundamentals to keep in mind when you are considering a trade in the pork bellies market. Therefore, before opening up a commodity account to trade pork bellies you should consult with a licensed commodity broker that follows the pork bellies market to discuss investment strategies.