Hedge fund corners cocoa market????

Discussion in 'Ag Futures' started by MohdSalleh, Jul 19, 2010.

  1. Is he gonna get fucked?

    http://www.bbc.co.uk/news/business-10682433

    19 July 2010 Last updated at 12:35


    Cocoa investor 'buys £650m of beans'
    Sacks of cocoa beans The price of cocoa has risen sharply in recent years

    Hedge fund manager Anthony Ward has cornered a large piece of the world's cocoa market after buying 240,000 tonnes of cocoa beans, reports suggest.

    The £650m ($992m) investment buys Mr Ward enough cocoa to make more than five billion small chocolate bars, the reports say.

    The investment was reportedly made by Mr Ward's hedge fund Armajaro, which would not confirm or deny the reports.

    The price of cocoa has risen sharply in recent years due to increased demand.

    The deal is the single largest cocoa trade in 14 years, the reports suggest.

    Unusually, it is thought the firm will take delivery of the cocoa beans and is likely to store them in warehouses in England and the Netherlands.
    Continue reading the main story
    “Start Quote

    If you control that supply and hold on to it and you squeeze the market, you see the price going up and at some point you release those supplies and then you make a mint”

    End Quote Chris Skinner

    Chris Skinner, chairman of the Financial Services Club said this represented "the whole of Europe's cocoa" - enough to fill "five Titanics".

    He said the price of cocoa had risen by about 16% in the past year because production of the beans had decreased in Africa.

    He told the Today programme: "I guess Mr Ward's thinking, 'Well, I'd bet on the fact that, in the future, if I get control of the whole supply of cocoa, then I can corner the market and make a bit more money out of this.' He's done it before, in 2002, so he's trying to do it again.

    "It's a bit like the film, Trading Places, with Eddie Murphy, with the pork bellies. If you control that supply and hold on to it and you squeeze the market, you see the price going up and at some point you release those supplies and then you make a mint."

    "You can speculate on the futures market on any commodity - from corn and wheat to oil and gold."

    Anti-poverty group the World Development Movement is calling for limits to be introduced to stop speculators influencing the market in coffee, cocoa and wheat.
    'Hot money'

    The author of its report, Tim Jones, told Today Mr Ward's cocoa investment represented the type of market speculation his group wanted to see curbed.

    He said: "The fact that he's taken delivery is something more unusual, but we see this speculation all the time in food markets, in coffee, in wheat, and this has real impacts on people across the world.

    "To have speculators pushing up prices, causing changes, causes big problems for farmers and increases poverty. In 2008 it was one of the reasons why hundreds of millions more people were pushed into hunger."

    Mr Jones said artificially high prices could lead farmers to grow the wrong crops, only to make a loss when withheld supplies were released to the market causing prices to fall.

    The World Development Movement wants the UK and EU to follow the example being set by the US and introduce limits on the amount of money speculators can put into markets to protect them from being swamped by "hot money".

    Mr Ward co-founded Armajaro in 1998 and is ex-chairman of the European Cocoa Association.
     
  2. That's a nice Froydian Slip. He's already "hit the iceberg". :D
     
  3. heech

    heech

    Cocoa (ICE US) is down 6% today, so that's about $60mm lost in marked-market terms in one day. His net worth is around $40mm, so...

    Someone is definitely challenging his ability to hold through margin calls.
     
  4. [​IMG]
     
  5. jonp

    jonp

    we can do this too. find a one, two dollar stock with very very low volume, buy a ton of it, watch the price soar, but then what? you would have to hope that you created enough hype for other traders and investors to start to buy after pushing up the price 10% a day... if not then you have half a company to dump with no one interested.
     
  6. That trade... was finger licking good.....
     
  7. heech

    heech

    Not quite. There are millions of kids waiting for their candy bars. Commercial buyers NEED their cocoa.

    There is a long history of fortunes being made and lost in cornering a market.
     
  8. jonp

    jonp

    didn't take that into account. is it possible to buy more of a commodity than what is produced annually? any history on futures market/the process of cornering a market would be appreciated.
     
  9. #10     Jul 20, 2010