The Secret Financial Life of Food

The Secret Financial Life of Food: From Commodities Markets to Supermarkets

Kara Newman
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  • Book Info
    The Secret Financial Life of Food
    Book Description:

    One morning while reading Barron's, Kara Newman took note of a casual bit of advice offered by famed commodities trader Jim Rogers. "Buy breakfast," he told investors, referring to the increasing value of pork belly and frozen orange juice futures. The statement inspired Newman to take a closer look at agricultural commodities, from the iconic pork belly to the obscure peppercorn and nutmeg. The results of her investigation, recorded in this fascinating history, show how contracts listed on the Chicago Mercantile Exchange can read like a menu and how market behavior can dictate global economic and culinary practice.

    The Secret Financial Life of Food reveals the economic pathways that connect food to consumer, unlocking the mysteries behind culinary trends, grocery pricing, and restaurant dining. Newman travels back to the markets of ancient Rome and medieval Europe, where vendors first distinguished between "spot sales" and "sales for delivery." She retraces the storied spice routes of Asia and recounts the spice craze that prompted Christopher Columbus's journey to North America, linking these developments to modern-day India's bustling peppercorn market.

    Newman centers her history on the transformation of corn into a ubiquitous commodity and uses oats, wheat, and rye to recast America's westward expansion and the Industrial Revolution. She discusses the effects of such mega-corporations as Starbucks and McDonalds on futures markets and considers burgeoning markets, particularly "super soybeans," which could scramble the landscape of food finance. The ingredients of American power and culture, and the making of the modern world, can be found in the history of food commodities exchange, and Newman connects this unconventional story to the how and why of what we eat.

    eISBN: 978-0-231-52734-7
    Subjects: Business, History

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Acknowledgments
    (pp. ix-xii)
  4. Introduction: Buy Breakfast
    (pp. 1-3)

    Few people can claim to have had a food epiphany while reading Barron’s, but that’s what happened to me. In a roundtable discussion of market experts, after many dry pages about where the S&P 500 Index and gold bullion might end the year, commodities trader Jim Rogers offered this wisdom: “Buy breakfast.”

    He was referring to futures contracts sold on frozen orange juice and pork bellies, which he expected to appreciate in value during the coming year. But to me, it was more than an investment idea. I thought of the BLTs and cartons of Tropicana orange juice I’d consumed...

  5. CHAPTER ONE How Does Commodities Trading Work?
    (pp. 5-15)

    This is not a book on how to trade commodity futures; it is a book about culinary history and the role that the commodities market has played in shaping culinary history. But before delving into the histories of the various contracts, it is important first to address three questions: How did the commodities market evolve into what we know today? How does the modern commodities market work? And perhaps most important, how does the trading of food-based commodities influence what we eat and what we pay for food?

    Though it is impossible to put a time stamp on the very...

  6. CHAPTER TWO The Spice Route
    (pp. 17-25)

    Spices were dubbed “gray gold.” Peppercorns were known as “black gold.” Throughout history, spices have been firmly linked with currency and commerce, arguably more so than any other foodstuff. Spices—specifically peppercorns—were traded for several decades in the United States commodity markets and continue to trade actively in India today.

    Without spices, we might not have a financial marketplace in the United States because the pursuit of pungent spices led to the “discovery” of America. Even the derivation of the word “spice” points toward value and currency. It is linked to the Latin noun species, from which the English...

  7. CHAPTER THREE The Commodity That Built a Nation: Corn Futures
    (pp. 27-41)

    Indigenous Americans introduced the world to corn. We have embraced it in cooking and never looked back. Corn has had an enormous impact on both America’s foodways and its economy. As Michael Pollan neatly demonstrates in The Omnivore’s Dilemma, corn is ubiquitous in our diets. It is the largest crop in the United States, both in terms of the value of the crop and the acres planted. In addition to its use in myriad processed and nonprocessed foods, as animal feed, and as a by-product for nonedible items from gasoline to adhesives, corn is seemingly everywhere.¹ Speculators have aimed to...

  8. CHAPTER FOUR Great Grains
    (pp. 43-61)

    A statue of Ceres, the Roman goddess of grain, sits atop the historic Chicago Board of Trade (CBOT), the exchange that made its fortune in the grain business. She has presided there, forty-five stories above La Salle Street, since 1930—a time when American agriculture was crippled by drought, and the United States was forced to import wheat. At the foot of the same historic art deco building is the Ceres Café, where traders and tourists mingle over lunchtime sandwiches on whole wheat bread slices and after-work whiskeys, distilled from humble grain.

    Grain trading has long been an important part...

  9. CHAPTER FIVE Butter-and-Egg Men
    (pp. 63-75)

    In Manhattan’s Duane Park sits a bench with a worn, engraved plaque: “Reserved For the Ghosts of Commerce.” Among the ghosts that haunt this now highly gentrified stretch of Tribeca were the humble dairy dealers known as the butter-and-egg men. It may seem hard to envision now, in the age of refrigerated trucks and ice-making machines, but there was a time when eggs and dairy products were highly perishable and precious. And the traders who dealt in contracts related to those products were the comfortable “butter-and-eggers,” wealthy but crude, who liked to joke that their wives were fat because they...

  10. CHAPTER SIX The Mochaccino Market: Coffee, Sugar, and Cocoa
    (pp. 77-89)

    There is some symmetry in knowing that much of the earliest trading of coffee (and other commodities) took place in coffeehouses. It is impossible not to make a mental leap to modern-day coffee shops and Starbucks franchises, where many a fledgling business is launched these days. Furthermore, most of the ingredients in the iced double cappuccinos fueling those entrepreneurial pursuits are affected by commodities market trade. Multinational conglomerates, like Nestlé and J. M. Smucker (owner of Folgers Coffee), certainly avail themselves of the commodities exchanges to help buffer against the price swings that can drive up the cost of their...

  11. CHAPTER SEVEN Cattle Call
    (pp. 91-105)

    A number of animal proteins have been traded on the commodities market, and nearly all have come and gone. Eggs had their heyday, of course; turkey futures and “broilers” (chickens) had their stint; shrimp had a short-lived run in the United States, though it continues to trade on certain Asian exchanges; and even pork belly futures have come and gone. Meanwhile, beef futures have solidly stood the test of time.

    There’s a reason modern-day money words such as “pecuniary,” “capital,” and “bull market” all have their linguistic roots in . . . cattle. Some money words harken back to the...

  12. CHAPTER EIGHT This Little Piggy Made a Market: The Rise and Fall of Pork Bellies
    (pp. 107-121)

    Bacon: we know it, love it, lust after it, obsess over it (and, in a recent TV commercial, marry it). However, we forget that it is essentially pork belly—cured, smoked, and fried into a delectably crisp, salty breakfast side, guaranteed to wake an entire household with its seductive, savory aroma. But traders know. And for fifty years, they counted on our collective bacon obsession, to profitable effect.

    As a financial instrument, pork bellies were iconic. For many, the image of greedy traders as pigs at the trough was equally iconic. Until pork belly became a headliner on restaurant menus...

  13. CHAPTER NINE When Money Grows on Trees: Produce Futures
    (pp. 123-137)

    Surely, you’ve heard this stern warning before: “Money doesn’t grow on trees.” But in the case of produce futures, money most certainly does grow on trees . . . and on vines and below ground too. By the late nineteenth century, both New York and Chicago had produce exchanges. San Francisco and Los Angeles also formed produce exchanges; so did Boston, in the form of the Boston Fruit and Produce Exchange. Although the “produce exchange” moniker hasn’t been used since the 1970s, when the New York Produce Exchange was folded into the International Commercial Exchange, produce contracts ranging from potatoes...

  14. CHAPTER TEN Super Soybeans
    (pp. 139-151)

    Now the number-two crop in America, the soybean, unbelievably, was once the ugly duckling of the agricultural world, deemed fit for feeding livestock but not people. Transitioning over the decades from “soja” to “soya” to “soy,” it is impossible now to imagine supermarkets devoid of soybean-based products, from Tofutti ice cream to soy-based veggie burgers. Nonvegetarians consume their share of soy too, whether in the form of soybean oil, the most widely used edible oil in the United States, or via soymeal fed to livestock. A growing global demand for nonfood soy-based products—like ink, adhesives, some fabrics, and biodiesel...

  15. CHAPTER ELEVEN The Future of Food Futures? Contracts to Consider
    (pp. 153-162)

    Pardon the pun, but this chapter is intended largely as food for thought. None of the food products discussed here are represented on U.S. commodities exchanges. However, there is reasonable evidence that a market could be made for each of them—or at least, that an argument for a market could be made, which is almost as good. All these commodities are considered to be sufficiently important that either the USDA or the Commodity Research Bureau Commodity Yearbook (or both) regularly provide pricing data for them. And experts regularly consider this pricing data in their analyses and predictions. Some products,...

  16. Epilogue
    (pp. 163-166)

    The commodities market has come a long way from those first grain trades at Haine’s Feed Store in Chicago. The exchanges have grown, evolved, and consolidated into the monoliths we know today. Meanwhile, a number of commodities contracts have come and gone. Just as food traditions evolve, so do food commodities.

    Why have so many of these contracts disappeared into history? In some cases, the culprit is technology. For example, egg futures languished as agricultural advancements meant year-round egg laying. And improvements in refrigeration and distribution eliminated the remaining vestiges of seasonality in eggs. The lack of seasonality smoothed out...

  17. Notes
    (pp. 167-182)
  18. Index
    (pp. 183-194)
  19. Back Matter
    (pp. 195-196)