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Mystery trader buys all Europe's cocoa

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Mystery trader buys all Europe's cocoa

Post  TBQ on Mon Jul 19, 2010 6:58 am

Even Willy Wonka might struggle to use this much chocolate. Yesterday, somebody bought 241,000 tonnes of cocoa beans.

he purchase was enough to move the entire global cocoa market, sending the price to the highest level since 1977, and triggering rumours and intrigue in the City.

It is unclear which person, or group of traders, was behind the deal, but it was the largest single cocoa trade for 14 years.

The cocoa beans, which are sitting in warehouses either in The Netherlands, Hamburg, or closer to home in London, Liverpool or Humberside is equivalent to the entire supply of the commodity in Europe, and would fill more than five Titanics. They are worth £658 million.

Analysts said it was very unlikely that a chocolate company, such as Nestle or Kraft, or even their suppliers, would buy such a huge order in one go and that is was probable that one or a number of speculators, possibly hedge funds, had attempted to corner the market. By doing this, they would have control of the entire supply in Europe, forcing the price yet higher.

Eugen Weinberg, an analyst with Commerzbank, said: “For one buyer it would likely be a little bit too large. It would be a crazy number. That said, if you’re cornering the market ...”

“If it looks like cornering, feels like cornering and the price difference between Europe and the US is so large, it probably is cornering.”

“There is some play taking place. No one really knows what is going on.”

Andreas Christiansen, president of the German Cocoa Trade Association, said the “hefty” price move was “a mirror of what can be done if people control the physical stock”.

Cocoa prices, which had been on the rise this year, rose 0.7 per cent yesterday, to £2,732 per metric ton. By contrast, cocoa being traded on the US exchange fell.

This is the highest price for cocoa in Europe since 1977, and comes after a series of weak harvests in Ghana and the Ivory Coast, the main areas where the crop is grown. Fears of floods in the Ivory Coast have sent prices even higher, as speculators have bet on another poor harvest, and a shortage of supply.

At the same time demand is on the increase, especially as China and India develop an ever sweeter tooth.

Cocoa prices have more than doubled since 2007, forcing chocolate makers to raise prices and in some cases to change recipes to use less cocoa.

Laurent Pipitone, senior statistician at the International Cocoa Organisation in London, said: “In the past two years, all companies have increased prices."

There are fears that the extraordinary activity on the commodity markets will filter down to higher prices on the shop shelves for the nation's favourite chocolate bars, even milk chocolate, which has only 25 per cent cocoa content.

The trade took place on the London International Financial Futures and Options Exchange (Liffe), a market which trades contracts in commodities such as corn, wheat, sugar, coffee and cocoa.

Most of these contracts are "options" or "futures" giving a trader the right to buy these commodities at a certain price at a certain time in the future. What made yesterday's trade so unusual was that the mystery buyer or buyers took physical delivery of the commodity.

The beans will be stored in one of Liffe's warehouses in Amsterdam, Antwerp, Bremen, Felixstowe, Hamburg, Humberside, Le Havre, Liverpool, London, Rotterdam, or Teesside.

There have been mounting worries that speculators have been distorting the cocoa market in recent weeks, with brokers writing a letter of protest to Liffe earlier this month.

Barbara Crowther, a spokesman at the Fairtrade Foundation, said that no farmers in West Africa would benefit from the higher prices. She said: "This speculation only serves to increase volatility and uncertainty. Part of the problems in rent years have been the lack of investment in improving cocoa farms. But the farmers have already been paid a set price – none of this money will filter down to them."

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Re: Mystery trader buys all Europe's cocoa

Post  TBQ on Mon Jul 19, 2010 7:00 am

Update: British financier Anthony Ward behind £658m cocoa trade

A British financier is behind a £658 million cocoa trade which single-handedly moved the global cocoa market.

Anthony Ward, 50, bought 241,000 tons of cocoa beans and now owns enough to manufacture 5.3 billion quarter-pound chocolate bars.

Mr Ward, who is worth around £36 million, holds so much of the market he could force manufacturers to raise the price of Britain's favourite chocolate bars.

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The transaction, the largest single cocoa trade in 14 years, was carried out last Friday by Armajaro Holdings, a hedge fund co-founded by Mr Ward.

The businessman began his career as a motorcycle dispatch rider before becoming a commodities trader specialising in cocoa and coffee.

The former Chairman of the European Cocoa Association has amassed up to 15 per cent of the word's cocoa stocks in the last ten years.

Mr Ward, who has an annual director's salary of £3.4 million, lives in Mayfair in London with his wife Carolyn. Outside of work he is known to be a passionate rally driver and lover of fine food and wines.

The cocoa beans from his latest trade are expected to be kept in warehouses in The Netherlands, Hamburg, London, Liverpool or Humberside and are the equivalent of the entire supply of the commodity in Europe.

Cocoa prices rose by 0.7 per cent as a result of the trade to £2,732 per metric tonne – the highest price for cocoa in Europe since 1977. It follows a series of weak harvests in Ghana and the Ivory Coast, the main areas where the crop is grown.

In 2002 Mr Ward made £40 million in two months after making a similar deal. He bought 204,000 tones of cocoa when West Africa was experiencing poor harvests and political instability in the equatorial area.

He then watched the price of cocoa increase from £1,400 a ton to £1,600 a ton.

Cocoa prices have more than doubled since 2007, following increased demand particularly from China and India, forcing chocolate makers to raise prices and in some cases to change recipes to use less cocoa.

Mr Ward was not available for comment.

http://www.telegraph.co.uk/foodanddrink/foodanddrinknews/7897075/British-financier-Anthony-Ward-behind-658m-cocoa-trade.html
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