We here at the Food Liability Law Blog like to end the year on a positive, or at least humorous, note, so two items in Tuesday’s Wall Street Journal caught our eye. 

Everyone, of course, has been barraged with Christmas movies the last month, but I am a big fan of New Year’s movies.  "The Apartment" is probably the best film that culminates on New Year’s, but the 1983 Dan Aykroyd/Eddie Murphy classic "Trading Places" is set up so that New Year’s Eve is a huge part of the plot.  For those of you who haven’t seen it (and if you haven’t, it will be on Comedy Central on January 2), Aykroyd is Louis Winthorpe III, a smug Philaelphia commodities broker whose bosses contrive to have him trade places with street person Billy Ray Valentine (Murphy) to settle a wager the stakes of wihch are one crisp dollar bill.  When the boys learn they’ve been taken for a ride, they team up and try to steal a key market report from the bosses’ operative during a New Year’s Eve train ride from Washington to Philadelphia.  Hilarity ensues, unless you’re the guy who ends up in the gorilla suit. 

In one scene, Valentine uses his street smarts to explain to the Duke Brothers (played by Don Ameche and Ralph Bellamy) why the price of pork bellies will drop:

Okay, pork belly prices have been dropping all morning, which means that everybody is waiting for it to hit rock bottom, so they can buy low. Which means that the people who own the pork belly contracts are saying, "Hey, we’re losing all our damn money, and Christmas is around the corner, and I ain’t gonna have no money to buy my son the G.I. Joe with the kung-fu grip!

According to the Wall Street Journal, though, the pork belly contract might become as quaint and nostalgic. to future viewers of this film as the G.I. Joe with the kung-fu grip (which amazon.com will sell you for a mere $129.99, plus shipping).  Pork bellies, of course, are the stuff from which bacon is made, and frozen pork belly contracts have traded on the Chicago Mercantile Exchange since 1961.  The reason for the impending demise of the pork belly contract is actually tied into the success of bacon as a consumer product.  Bacon eating apparently was far more seasonal a half century ago, so pork bellies would be frozen in the fall and defrosted for summer bacon, lettuce and tomato sandwiches.  Producers, thus, needed a hedge against the summer’s prices when they put them into the freezer.  The contract only worked with physical delivery, rather than cash, requiring participants to be prepared to handle 40,000 pounds of frozen raw bacon.  Hint:  it won’t fit into your freezer.

As you may have noticed, bacon is quite trendy.  Celebrity chefs are covering bacon with chocolate and almonds. My own neighborhood ice cream place serves maple ice cream with chunks of bacon in it over oatmeal.  And of course, the fast food places are in a space race to put more and more slices of bacon on a burger, such as the Baconator at Wendy’s, the triple version of which features nine strips of applewood smoked bacon.  The result is that nobody needs to freeze those frozen pork bellies for the summer; they’re in heavy use year-round.  Thus, a trader named George Segal (not the actor who was in "The Last Married Couple in America" with Luis Contreras, who was in "48 Hrs" with Eddie Murphy, according to the Oracle of Bacon) is, for the first time since he started in 1972, no longer holding any pork belly contracts because there were none to trade.  Possible fixes include allowing the contracts to be settled with cash instead of with 20 tons of pork bellies, and allowing contracts for fresh as well as frozen pork bellies. 

The difficulty that the CME and traders like Segal, as well as producers of pork bellies and processors of bacon, face is price discovery.  Instead of a vibrant traded market price, they are left with voluntarily reported prices from the Agricultural Marketing Service.  It is ironic that it was easier to get a reliable price for bellies in 1983 than it is in the Internet Age.

The second piece of news involves the commodity at the center of "Trading Places," frozen concentrated orange juice.  This morning, I woke up to a message from a friend who is visiting her parents in Broward County , Florida:  "Frost on the windows here in Southern  FLA."  And, not surprisingly, the cold weather in Florida has led to the Wall Street Journal headline, "Florida Cold Heats Up OJ Prices."  In "Trading Places," the plot revolves around the theft of a crop report on frozen concentrated orange juice to be issued by the Secretary of Agriculture on the first day of trading after New Year’s.  One thing that has changed since 1983 is that Florida’s weather is actually less critical to the FCOJ market than it was; Brazil is the number one producer of FCOJ in the world (California oranges are mainly consumed by eating).  Thus, that crop report might not have quite the impact it did in the movie, although the movement of prices (including the highest price in nearly four years) caused by the Florida freeze might argue otherwise.

Somewhat unrealistically, both Winthorpe and Valentine have trading privileges at the New York Mercantile Exchange, with their three-letter identification badges.  I proudly own a similar badge, given to me at the Chicago Board of Trade when I was on the floor for a day after taking a seminar in hedging corn futures.  No matter what our hand gestures, though, no one was going to write us a ticket.

As Eddie Murphy’s character, disguised as an exchange student from Cameroon, says, "Merry New Year!"