Do you remember hearing about pork bellies back in the day? They were the frozen undersides of pigs sourced mainly for bacon.
They also represented the futures market in popular culture. (If you haven’t seen the 1983 comedy “Trading Places” with Dan Aykroyd and Eddie Murphy, I recommend it for a fun evening of laughter.)
Trading in frozen pork belly futures started in 1961 on the Chicago Mercantile Exchange (CME).
It allowed meatpackers to hedge the volatile hog market and later, food inflation more generally.
Since the ‘80s, with folks eating more pork year-round — and thus requiring less need for cold storage (and little need to hedge the frozen meat for sale in summer) — the CME halted trading of the commodity in 2011.
Nowadays, pork producers and consumers still hedge some pork costs with CME’s lean hogs futures.
In addition to lean hogs, the other livestock futures traded on the CME are live cattle and feeder cattle.
- Now, for regular investors, I do NOT recommend trading futures.
However, I CAN recommend some exposure to livestock as a small portion of your portfolio ... especially as a way to hedge the current inflationary environment!
And speaking of this market environment, I would highly recommend checking out Dr. Martin Weiss’ Weekend Windfalls, where you can expect weekly income when you need it.
It’s a fascinating strategy, and if you’d like more information, click here now.
I’d also suggest checking out exchange-traded funds (ETFs) like the Invesco DB Agriculture Fund (DBA).
With a hefty average volume of 1,248,267 shares per day, DBA tracks a diverse basket of agricultural futures ... including livestock (and every other agricultural commodity I’ve mentioned here over the past several weeks).
Shares have been on a tear lately and are up nearly 25% over the past year.
- Just be aware the fund’s expense ratio is a relatively high 0.85%.
For a more direct exposure to the meat packing industry, there’s Tyson Foods (TSN). While you may be familiar with its chicken, the company also operates in beef, pork and prepared foods.
The firm, based in Springdale, Arkansas, was founded by John W. Tyson in 1935.
TSN has been doing quite well over the past year, outperforming even agricultural commodities in general (DBA) and the S&P 500 (SPX). Shares are up nearly 40% in the past year.
Remember to conduct your own due diligence … but be aware that TSN is in the midst of a pullback.
Now may be a good time to grab a few shares.
All the best,
Sean
