The reaction of the others was indeed part of the problem as they were laughing at the (supposed) humour. I have briefly spoken to the singer, who said the song was from the singing of black people and that this made it OK. He claimed that his intention was not racist. The session there was not the same after that, apparently and the pub closed shortly after and the session split to different venues. This split was roughly on the lines of folk v blues but the singer of the song did not attend either of the new ones.