Bacon prices go up and down (at the same time)
Something happened today which Rocky has never seen before in nearly three decades of trading. The front (August 2009) contract went limit DOWN, at the same time that the next month (February 2010) contract went limit UP. And the spread then stopped trading at more than a 3-sigma differential (February over August).
Rocky was ready to rent a freezer truck, fill it with frozen pork bellies, and park it in his front yard for six months to exploit the 50%+ price differential. Unfortunately, the commodity exchange does not permit “last year’s” bacon to be sold as “next year’s” bacon, so the arbitrage cannot be exploited.
More importantly, Trophy Wife was none too happy about the prospects of an eighteen-wheeler loaded with tons of unkosher, artery-clogging vittles driving over her petunias.
So…Rocky has no “belly” position, the bizarre mispricing remains — and bacon lovers should get ready to stock up their home freezers, as supermarket bacon prices will probably be much higher next spring.