EDUCATORS ’ PERSPECTIVE
The House that Pork Bellies Built
By Brian Grinder and Dan Cooper
Mistaking the Chicago Mercantile Exchange ( CME ) for a breakfast spot — with its menu of bacon and eggs — was an understandable error in the early 1960s . This ugly stepsister of the Chicago Board of Trade was not well known outside of Chicago , and it was in danger of closing after onion futures were banned by an act of Congress in 1958 ( See Educators ’ Perspective : Hold the Onions , Please ! The Short History of Onion Futures , Summer 2021 , pp . 7 – 9 ). This left the CME in the unenviable position of relying on fragile egg futures contracts as its only source of income .
The desperate search was on for new contracts to replace lost revenue from onion futures . One possibility , Florida frozen orange juice concentrate contracts , never made it past the suggestion stage . Others , such as frozen shrimp and frozen broilers contracts , were actually developed and traded , but since neither contract caught on , both were discontinued .
The CME was eventually rescued by one of the most unlikely futures contracts : frozen pork bellies . Bob Tamarkin , in his history of the CME entitled The Merc , writes that , “ pork bellies were about as well known to the average trader as was the theory of particle physics .”
Culinary historian Kara Newman defines pork belly as “ the meat carved from the underside of the abdomen and chest of the pig , which consists of alternating layers of fat and lean muscle .” Bacon is basically pork belly that has been cured and cut into strips .
Newman also reminds us that , “ Long before Wall Street became a commercial center , it owed its name to hogs . Freeroaming hogs were famous for rampaging through the valuable grain fields of colonial New York City . The Manhattan Island residents chose to block the troublesome hogs with a long wall on the northern edge of what is now Lower Manhattan ( though according to other accounts , that wall was built to keep out Native American inhabitants ). A street came to border this wall : Wall Street , now known as the financial center of the United States .”
Trading began in pork bellies in 1961 in a trading pit described in The Merc as “ the size of a pig sty .” Initially , it looked like pork bellies would go the way of shrimp and broiler contracts when the initial contracts failed to attract hedgers . Many objected to the name of the contract . “ Pork bellies ” didn ’ t exactly inspire visions of untold wealth in traders . Although many alternative names were suggested — uncured bacon , bacon-in-therough , pork tummies and unprocessed bacon — the unsavory name stuck because the term was used by the pork industry , as well as by various government agencies .
Trading finally took off after the contracts were revised , making them more attractive to hedgers whose increased use of pork belly futures attracted the attention of speculators . The turnaround in the pork bellies market is best seen by following the fortunes of a novice trader named Barry Lind . In his first year , Lind traded eggs and earned about $ 3,400 . When he switched pork bellies , his income began to grow exponentially . According to Tamarkin , “ By the end of 1963 , he was up to $ 1,000 a month , and in 1964 , $ 1,000 a week , as bellies rose from 40 cents a pound to 55 cents . By 1965 , through customer business , he was pulling down $ 10,000 a month .”
Pork bellies were so successful partially because of seasonal demand . Newman notes that in the 1960s demand for pork bellies increased during the summer as tomatoes ripened in individual gardens across the country . All those ripe tomatoes were begging to be made into bacon , lettuce and tomato sandwiches , and the demand for bacon increased accordingly .
Additionally , the CME mounted a major advertising campaign to promote the
little-understood pork belly . The advertising budget increased significantly , and the one-man ad agency of Martin A . Cohen was hired to promote both the CME and pork bellies . Leo Melamed , a successful pork bellies trader who became chairman of the CME in 1969 , described Cohen as a “ highly creative mind ” who “ fashioned some of the most provocative and awardwinning ads the business world had ever seen .”
The first ad Cohen created was simply a photograph of a huge pig under the title , “ Capitalist Pig .” According to Melamed , the ad , which ran in the Wall Street Journal , was “ Simple , but so clever , effective and sassy .” However , some CME members were baffled by Cohen ’ s offthe-wall approach . According to Cohen , exchange president E . B . Harris “ was one of my early detractors . He thought the ads initially were insane , but he became an early convert .”
Cohen would continue to work with the CME for 17 years promoting and educating the public on the need for futures markets . Many of his ads focused on pork bellies , CME ’ s star contract . One ad used a portrait of Sir Francis Bacon with the title , “ Sir Francis Pork Belly .” Cohen also wrote eye-catching slogans for CME ads , such as “ Were you born under the sign of the
8 FINANCIAL HISTORY | Summer 2024 | www . MoAF . org