The huge deal – enough to keep the whole of Europe in chocolate for a year – means that Ward’s London-based Armajaro Holdings fund has effectively cornered the market, and anyone wanting to buy cocoa beans anytime soon is going to have to buy them from him. The news sent cocoa prices soaring to their highest levels for over 30 years, £2,732 per tonne.
Apart from its enormous size, what makes the deal particularly unusual is that Ward has actually taken delivery of the beans – all 241,000 tonnes of them. Hedgies don’t usually like to get so intimate with the commodities they are trading, preferring as a rule to bet on price movement rather than actually dirty their hands with the bothersome logistics of the wholesale market.
So what’s going on? There’s more than just a City trader with a sweet tooth involved here. Ward is effectively betting that the cocoa price – which has already risen by 150% in the last 18 months – will continue to do so, allowing him to take a tidy profit on the resale.
Given that harvests this year have been poor and that traditionally the busiest month in the cocoa market – September – is just around the corner, he may well have a point.
In fact, by buying so much cocoa, he has gone a long way towards guaranteeing that the price will continue to rise. With so much of the stuff in his Amsterdam warehouses, he will be more or less able to charge what he wants.
It’s not the first time that Ward – who rejoices in the slightly unfortunate sobriquet ‘Chocfinger’ has done it either. He last cornered the cocoa market back in 2002, with a deal for some 200,000 tonnes of cocoa on which he made £40m. The FSA investigated the deal, but its’ findings were never made public.
This latest trade has led inevitably to cries of market manipulation and speculation. No one, goes this argument, benefits except Ward and his cronies, despite the fact that they don’t actually contribute anything much. They don’t grow the cocoa, nor do they process or manufacture the chocolate. But they do get to keep the profit – Ward himself is reckoned to be worth around £36m.
It’s hard not to have some sympathy with this view, except for the fact that, hey, that’s capitalism for you. Short-term blips like this are all part of the market’s self-correcting mechanism, in the long run it all evens out – in theory anyway.
Well, maybe – although we have seen how the impact of such ‘short-term’ market anomalies can be pretty devastating recently. But Armajaro has a long-term game plan which deserves closer inspection. Its strategy is to use its profits to invest in African food production and also in much-needed freight and transport infrastructure on the continent, like ports and roads.
So it’s still speculation all right, but it may not be quite as empty as it first appears. Even if it pushes the price of a Crunchie up by a few more pence, it will probably do more to improve the human condition in the long term than all those dodgy mortgage-backed securities did a year or two ago. I should cocoa.
In today's bulletin:
Fraud costs record £1bn so far this year
Boeing's Dreamliner touches down in UK
Cable sticks the boot into the banks - again
Sweet £658m deal makes Ward cocoa king - bar none
Salary increases 'below inflation'