On Saturday morning TCM showed a film based on a story I had read a long time ago. In 1941, James Howell Street, who had already had The Biscuit Eater published in the Saturday Evening Post, wrote another boy-meets-dog short story, Weep No More, My Lady which also ran in the weekly magazine. Weep No More was so popular that Street expanded it into a novel, Good-bye, My Lady, which is also the title of the film. I hadn't seen the film before. I think I read the short story, but I had thought the boy named the strange dog, "Can't Bark," instead of "Lady," so I might have conflated two different Basenji stories over the years.

Street grew up near Pascagoula, Mississippi where the story takes place, and, "was a hobo, soda jerk, butcher, reporter, and minister before he became a famous writer."  He later experimented with organic farming and advocated social justice for blacks. Weep No More, My Lady was a challenging coming of age story. After it becomes clear that Lady belongs to someone else, the boy, Skeeter asks his Uncle Jesse if finders-keepers means he can keep the dog. Jesse wisely lets Skeeter decide right and wrong for himself.

The film boasted a strong cast led by Walter Brennan, Phil Harris and Sidney Poitier. Skeeter was played by Brandon de Wilde, famous for asking Shane to come back. I enjoyed the film, thoroughly, but TCM host Robert Osborne said despite all the great performances, Good-bye My Lady had fizzled at the box office. I suspect there were two problems. First, Sidney Poitier plays a college-educated black man, which wouldn't have played well in the South. Second, director William Wellman stuck to the original story ending in which Skeeter gives back the dog. Maturity is a great subject, but America was founded on finders-keepers.

As much as Saturday Evening Post readers liked the short story, their outcry about the realistic outcome eventually moved Street to reunite Skeeter and Lady in a followup story. Also the breeder gave the dog used in the film to de Wilde. So in print and life, there were happy endings after all.

Now, on my Foodflation post, Emma Zahn made a great comment:

My guess is that there is a lot of money out there looking for a place to speculate and it is probably driving food prices up as much as or more than anything else.  Look what its done with gold and other commodities. ...

There was a time when wealth meant land, factories and businesses. Profits were reinvested in one's own place. Nowadays there seems to be less factories and a lot more cash to invest - everything from pension plan money to drug money.

Because finders want to remain keepers, when the stock market is too scary, speculators look to supposedly recession-proof commodities, like gold and oil. During normal times, speculators bet on prices going both up and down, as they are doing right now, but one of the memes before the 2008 crash was that speculators were driving the price of oil higher and higher. The Peak Oil community blamed old-fashioned supply and demand, but on May 17th 2008, one Peak Oil spokesman, economist James Hamilton wrote at his Econbrowser blog:

Let me repeat here that I do not believe that speculation is the reason oil went from $60 to $120 a barrel. The biggest part of that longer term trend is due to fundamentals, not speculation. Notwithstanding, it does appear that speculation has gotten ahead of those fundamentals in the most recent developments.

At the time that was quite an admission. With Did Speculation Fuel Oil Price Swings?, 60 Minutes closed the barn door in Jan 2009:

Asked who was buying this "paper oil," Masters told Kroft, "The California pension fund. Harvard Endowment. Lots of large institutional investors. And, by the way, other investors, hedge funds, Wall Street trading desks were following right behind them, putting money - sovereign wealth funds were putting money in the futures markets as well. So you had all these investors putting money in the futures markets. And that was driving the price up."

In a five year period, Masters said the amount of money institutional investors, hedge funds, and the big Wall Street banks had placed in the commodities markets went from $13 billion to $300 billion. Last year, 27 barrels of crude were being traded every day on the New York Mercantile Exchange for every one barrel of oil that was actually being consumed in the United States.

Essentially, there was so much mark money pouring into oil futures that financiers couldn't resist fixing the prices. Days ago, Hamilton posted, Oil shocks and economic recessions, a discussion of his recent research paper, Historical Oil Shocks (pdf):

I've just completed a new research paper that surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Here I report the paper's summary of oil market disruptions and economic downturns since the Second World War. Every recession (with one exception) was preceded by an increase in oil prices, and every oil market disruption (with one exception) was followed by an economic recession.

Oil prices certainly affect food prices, but is there direct speculation in food? In the Minyanville chart below, coffee, corn, wheat, oats and soybeans all outpace gold.

Are commodity prices already overdone? Like everything else, it depends. Each commodity has its own story -- amply demonstrated by the chart above.

Commodities appear sexier in rough times than in good times because they are investors’ way of voting against currencies and financial assets (call it increased macro/micro ratio). The price action can be both startling and tremendous. But booming commodities don’t reflect their fundamentals alone; they reflect a combination of those fundamentals and some quantity of premium that indicates a “no vote” on governments and financial systems. You want to cull out the noise and focus on fundamentals in order to make sense of what will otherwise be a distorted and misleading picture.

In another Minyanville post, Crisis 2011, originally from iTulip:

The costs of the Fed’s pro-inflation policies are largely born by the middle class. High food and gasoline prices, often dismissed by statisticians as too volatile to include in the CPI, are included in the producer price indexes, and the trend is clearly up.

Food may only represent 16% of personal consumption expenditures (PCE) for US consumers as a whole, but 4.1% food price inflation, with 7.5% intermediate food price inflation in the pipeline, is a big deal for a family making $50,000 a year. That’s down 4% from $52,000 10 years ago.

But is that speculation? In the Independent, How Goldman gambled on starvation, makes specific accusations of food speculation driving up prices too high for overseas poor:

For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he'll lose some cash, but if there's a lousy summer or the global price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.

Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into "derivatives" that could be bought and sold among traders who had nothing to do with agriculture. A market in "food speculation" was born.

So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles's crop at all. ...

In 2006, financial speculators like Goldmans pulled out of the collapsing US real estate market. They reckoned food prices would stay steady or rise while the rest of the economy tanked, so they switched their funds there. Suddenly, the world's frightened investors stampeded on to this ground.

So while the supply and demand of food stayed pretty much the same, the supply and demand for derivatives based on food massively rose – which meant the all-rolled-into-one price shot up, and the starvation began.

So it seems clear enough that there is food speculation, and while it may not be hurting Americans as much as the world's subsistence poor, so far there's no additional regulation to prevent speculators from betting on starvation again.