Real Life Willy Wonka Cornering The Cocoa Market

Who wants to hear about boring old normal millionaires doing boring business deals when there’s a guy in London buying all the cocoa he can get his hands on and scaring all the other chocolate bar makers in his quest? Hedge fund manager Anthony Ward apparently has enough cocoa in his control to make more than five billion chocolate bars. Yum!

Not everyone is a fan of Ward, as his cuckoo for cocoa tactics could drive up prices just in time for the holiday season. Cocoa prices are already up 150 percent there from 2008, says the New York Times.

Ward has been going on his binge through his private investment firm, Armjaro, and is estimated to control 7 percent of annual cocoa production worldwide.

His latest move, said to be a $1 billion bet in the London market for cocoa futures, is getting some in the industry upset, as they fear he’s creating a shortage on purpose in order to drive up the price and sell off his coca when the demand gets great enough.

I just want to go to his offices and swim in the chocolate river! Where are those dang golden tickets when you need’em?

In Trader’s Cocoa Binge, Fear for Chocolate Prices [New York Times]

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  1. outlulz says:

    I can recognize that box of See’s Candy in the picture in an instant.

    • joel. says:

      Just thought the same thing…. Gotta order some now. One of the worst things about moving away from California is no See’s samples.

      • LadySiren is murdering her kids with HFCS and processed cheese says:

        Yeah, no See’s out here in BFE, NC either. Oh how I miss my See’s chocolate. :(

        • Starfury says:

          It’s sooo nice living here and having a See’s candy shop in the mall.

          Plus the factory is just up hwy 101 from where I work.

    • JulesNoctambule says:

      Oh, I feel so much better that I’m not the only one.

  2. Lars says:

    No worries though, markets totally don’t need any regulators to step in. The invisible hand will take care of everything.

    • wrjohnston91283 says:

      Does this really need regulation? This isn’t water, gas, electricity or nutritious foodstuffs. It would be tough to make an argument that people need this to survive. Chocolate companies will suffer lower profits and prices will increase for consumers of chocolate goods – in the short run. In the long run, more cocoa will be grown as the market price has increased – its not in limited supply like oil or silver.

      Think about gold – governments across the world have vast supplies of gold. If they were to all release their supplies, prices would drop, resulting in lower prices of electronics and jewelry. But is there an outcry over that?

      Ward is stockpiling cocoa planning on selling in the future for a profit – that didn’t work that well for the Hunt brothers will silver in the ’70s, and I don’t expect to to work well here either. I would assume that he’s buying a lot of this on margin, and as more farmers plant cocoa to take advantage of higher prices, he’s going to have to buy larger amounts of cocoa each month to keep the prices high – what’s his exit strategy for selling it all?

      • evnmorlo says:

        Actually he isn’t dumb. Cocoa plants take at least 5 years before they produce anything, so supply cannot be increased. And candy manufacturers have high margins and probably use less cocoa than you’d think, so there is plenty of room to steal profit even before squeezing the captive holiday consumers.

    • evnmorlo says:

      Government regulation of agricultural prices have not lead to very many positive results

      • mommiest says:

        Agreed, but I don’t think you need to regulate prices, just go after the jerk who trying to corner the market so that the market can function more freely. The Hunt brothers whom you cite below were fined, forbidden from trading on commodity exchanges, etc.

        • Draygonia says:

          Where does the government draw the line though? (Since you obviously cannot)

          • mommiest says:

            It’s not that hard. Cornering a commodity market makes it less free. Stifling information or misinforming customers makes a market less free. These are practices that should be restricted.

            That’s why we have truth in labeling and anti-trust laws. Not perfect, but we can use them in the most egregious cases.

            And as for that “since you obviously cannot,” remark, I just did oppose price fixing. Obviously.

    • nova3930 says:

      It will, because if he drives up the price of chocolate too high, people WILL cut back on their consumption because in no way, shape or form is chocolate necessary to survive. Chocolate used to be a luxury item and could very well again, should he push too hard….

      • mommiest says:

        You have a point, but a lot of small businesses like bakeries, chocolatiers, even restaurant owners can get caught in a squeeze like this. They’re having a tough enough time as it is. I don’t want to see anyone put out of business (or even have to lay off a pastry chef) so that some jerk who builds nothing, creates no jobs, and thinks he’s God’s gift to finance can stockpile even more money.

        That’s why authorities need to step in when someone tries a stunt like this.

        • Conformist138 says:

          Exactly. It’s always easy to say “eh, so we won’t buy that product”. Really, this guy just gave a tiny shake to a tall ladder stacked with jobs and businesses (both large and small). I believe that, yes, products and popularity ebb and flow and eventually some industries just die entirely, but this isn’t the same natural fluctuation. It’s just one person being a jerk and artificially raising the prices of our Cocoa Puffs.

          Money making money just for money’s sake needs to stop, it’s just a giant game meant to siphon off cash and appear productive while contributing nothing to the world (and too often causing problems for everyone else).

  3. ash says:

    He has 7% of the market, which to a layperson, seems relatively small?

    • tgrwillki says:

      7% of the market is actually enough to move things out of equilibrium for a short time period.

      Basic economics would show us that by contracting the supply inward 7%, prices would rise based on the elasticity of the market. What would end up happening would be the people with the lowest willingness to pay would be pushed out of the market, and 93% of the chocolate would be sold at the price dictated by the contracted market, based on Chocolate’s elasticity of demand.

      I probably would do better if I had an idea of what the price elasticity of demand for chocolate was.

      Anyhow, the principle can be seen illustrated here:

      http://www.economicshelp.org/microessays/equilibrium/price-elasticity-demand.html

  4. sir_eccles says:

    Cocoafinger, he’s the man, the man with the chocolate touch.

  5. MaxMiami says:

    Mars has already replaced cocoa butter/liquor with vegetable oils in some of its chocolate products. Before raising prices, companies will reformulate products to use less of it.

    Look out for less chocolate and more “chocolatey” and “chocolate flavored” candies.

    • gc3160thtuk says you got your humor in my sarcasm and you say you got your sarcasm in my humor says:

      Yeh I tend to try & avoid those with chocolate flavvor or with lotsof soy in them. Cacao nibs ftw.

    • Powerlurker says:

      European confectioners regularly do this already, and they’re still allowed to call it “chocolate”. The US actually has higher standards on the matter in this case.

  6. aintgotone says:

    “Cocoa prices are already up 150 percent there from 2008, says the New York Times.”

    Someone please tell me how I got a 5 ounce box of Milk Duds for only a dollar at 99 Cents store!

    • JulesNoctambule says:

      Take out the filling, wax additives in the coating and other non-chocolate aspects of Milk Duds, and you’re unlikely to be left with a whole lot of chocolate.

  7. OnePumpChump says:

    Shit should be illegal.

    Like if you aren’t equipped to take delivery, you shouldn’t be able to buy futures.

    • Dinhilion says:

      You sir- are funny.

    • Mariushm says:

      He actually took delivery. Several warehouses in various countries in Europe are full of its cocoa.

    • mianne prays her parents outlive the TSA says:

      Wow! Suggesting bringing about an instant collapse to the commodities market as well as a few others.. (FOREX comes to mind) All to lash back at one rich asshat.. Great plan there!

  8. jeff_the_snake says:

    If they just passed a law making it legal to kick a billionaires ass I bet most of this sort of dickhead behavior would stop immediately

  9. Intheknow says:

    Yep. hat’s a box of the best chocolate in the world – bar none! Sees!

  10. kompeitou says:

    people should buy their chocolate now, or be priced out forever.

  11. RogueWarrior65 says:

    If he’s Willy Wonka, I’m a vermicious knid.

  12. Omali says:

    Oompa Loompa Doopity Doo
    I’ve got the perfect puzzle for you
    Oompa Loompa Doopity Dee
    If you are wise you’ll listen to me

    What do you get when you’re sitting on sweets?
    Cavorting more than any sane man needs?
    What do you get causing shortage and grief?
    Sucking up all the chocolate this year?
    (A massive kick right in the ass)

    Oompa Lompa Doopity Dah
    If you’re Wall Street trash you will go far
    You will live in happiness too
    While the rest of the world looks and hates you!
    (Doopity doo)

  13. Wrathernaut says:

    Since cocoa is a renewable resource, this plan just seems destined to fail.

  14. dg says:

    Didn’t the Hunt brothers try this bit with Silver? Seems like it came crashing down on them…

    • usa_gatekeeper says:

      Thank you! that was the first thing that came to my mind when I read this, too. I was on my way to post a similar remark until I encountered your comment.

      I hope the same thing happens to this guy … I’m not that big on hedge funds in the first place, and when they start doing things like this to come up with a better return for their clients, it’s bad.

  15. PencilSharp says:

    Expect to see lots more of this over the next few years. It’s been done with oil for some time now, resulting in crude oil trading for anywhere between 2X to 4X its intrinsic value (about $35/bbl), resulting in a massive drag on the worldwide economy. And even Californians haven’t forgotten how Enron traders screwed the entire state with their manipulative schemes…

    Unfortunately, commodity manipulation is comparatively easy these days, due to advances in technology that have made 24/7 markets possible, and financial institutions with zero moral restrictions when it comes to making money.

    When markets refuse to police themselves, it’s up to governments to step in and enforce restrictions on such activities. But… what happens when that same government sees benefits for itself in such shenanigans? Think: “green energy” schemes with oil and greater “campaign donations” from the Enrons of the world.

    There is a solution for the Anthony Wards of the world. It has something to do with brass and the number 44…

  16. RDSwords says:

    Swap “chocolate” for “diamonds” in the article, and you’ll see how DeBeers has inflated the diamond market.

  17. AllanG54 says:

    The Hunt brothers did the same thing with silver about 30 years ago. Drive the price up from about $6 an ounce to $14. They ended up just about bankrupt when the market collapsed.

  18. Ichabod says:

    At least he is only crushing small businesses and not starving people to death. You gotta love the “Free market” screw you I neeeeeed money attitude.

  19. Genocidicbunny says:

    “His latest move, said to be a $1 billion bet in the London market for cocoa futures, is getting some in the industry upset, as they fear he’s creating a shortage on purpose in order to drive up the price and sell off his coca when the demand gets great enough.”

    Coca? Bit of a freudian slip there.