I remember working on the Broadcast News desk at a well-known wire service and the editor yelling at me, "where are the pork belly futures?" And he refused to run the agriculture report without them for fear of the wrath of angry radio and television stations in the Midwest that were depending on them for their viewers and listeners.

It's doubtful that scenario would occur today primarily because when it comes to pork bellies, the one-time futures kings of the commodity pits are close to going -- if you'll pardon the pun -- belly up.

In fact, when you walk the floor of the Chicago Mercantile Exchange CME) you may not even find any pork belly traders. For the past 50 years, pork bellies were among the most traded commodities at the CME, but in recent years, volume has dropped considerably and the bitter irony of it all is that the reason is due to the growing popularity of bacon.

Pork belly primer

For those of you who have no idea what a pork belly is, it's a slab of frozen meat from which bacon is cut. Futures contracts on pork bellies began as a way for meat packers and food companies to manage their price risk of bacon.

Pork bellies were frozen and stored away in the winter, and then thawed out in the summer to accommodate the annual summer spike in bacon demand. The summer was when the nation devoured millions of bacon, lettuce and tomato sandwiches.

It was this seasonal pattern that created the need for producers to hedge against price fluctuations.

Over the years bacon grew more popular and became less seasonal as it appeared on breakfast dishes, hamburgers and in salads. Food companies no longer need to store as many frozen pork bellies during the winter months.

Declining fortunes

In the 1950s, 60s and 70s, pork bellies were one of the highest traded commodities available. This past November, just six contracts changed hands in the entire month. The pork-belly pit that had once been the center of attention, has since been moved to a corner of the CME's floor, and is now just an appendage to the lean-hog-trading pit.

George Segal is one of the last pork-belly traders at the CME. Recently, he found himself alone in the market. He used the exchange's electronic-trading system to place two orders -- one to buy and one to sell. By day's end, no one else had entered the market, his offers were still dangling, and pork bellies passed another day with no trades.

What it means

So, how does this affect us? Without a viable hedging tool for pork belly prices, bacon producers, and consumers, can be subject to price fluctuations. Retail bacon prices in November surged 34 percent from a year earlier to close to $4.70 per pound. According to the Bureau of Labor Statistics, that makes bacon more expensive than pork chops.

For independent bacon processors, the decline of the pork-belly futures contract has meant that pork belly prices are becoming a mystery. The amount they pay for spot bellies is now based on a daily price quoted by the Agriculture Department, which collects it from producers on a voluntary basis.

This year, spot prices have soared 45 percent from June to an all-time high of $1.60 a pound in September, before tumbling back to a low of 88 cents by late October. Now they sell for around 96 cents.

New life

According to the Wall Street Journal, the CME and industry executives are trying to rejuvenate the pork-belly future. The exchange is looking at modifying some of the contract's specifications, such as allowing traders to settle in cash instead of actual slabs of meat.

Currently sellers, if holding a contract through expiration, must deliver 40,000 pounds of inspected frozen pork bellies with a producer certificate within 15 days, and a buyer must take possession. Another exchange idea is to trade fresh pork bellies instead of frozen ones.

The Journal says changing the contract from physical settlement to cash settlement could help. Financial traders have largely shunned the contract because it requires buyers to take possession of massive quantities of meat.