Ok -

I retraced my steps, backwards (the dogs were watching me like I was insane)
Checked the washer and dryer
Checked under the bed
Checked the laundry basket
And about a zillion other places - no sign of it. I even checked the chicken shed.

I'm convinced Squid knows more then he's letting on. He's been watching me search for it with a sly smile on his face - "I know something you don't know" sort of thing. But it's not in his bed, behind the computer desk (thats where he likes to hide things) or in his mouth, so I'm stumped. Maybe I can bribe him into giving it back. A big yummy dog treat should do the trick