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Chocolate Prices to Soar…? #fb

July 20, 2010

Chocolate prices to soar after ‘extraordinary’ cocoa sale

19/07/2010 1:30:00 PM

There are concerns the price of chocolate confectionary will rise after a British financier bought 241,000 tonnes of cocoa beans, the equivalent of Europe’s entire supply of the commodity.

The trade took place last week on the London International Financial Futures and Options Exchange (Liffe), was worth more than $1 billion and sent the price of cocoa in Europe to the highest level since 1977, the UK’s Daily Telegraph reported.

While it was initially unclear who the buyer was, it has since been revealed Anthony Ward, a hedge fund co-founded by financier and former chairman of the European Cocoa Association, was responsible for the transaction.
The cocoa beans are expected to be warehoused in the Netherlands, Hamburg or in London, Liverpool or Humberside.
The amount of beans bought in the purchase is enough to fill more than five ships the size of Titanic.
The "extraordinary" purchase has pushed European cocoa prices higher to 0.7 percent to nearly $5000 per metric tonne and there is speculation that the purchasers now have control of the entire supply of chocolate in Europe. In comparison, cocoa prices in the US are falling.
"For one buyer it would be likely to be a little too large. It would be a crazy number," Eugen Weinberg, an analyst with Commerzbank told the Daily Telegraph.
"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 are fears that this activity on the commodity markets will filter down to the supermarket shelves, with higher prices on even those chocolate bars which contain only 25 percent cocoa.
Cocoa prices have more than doubled since 2007, forcing chocolate makers to raise prices and make changes to recipes to use less cocoa.
Potential flooding in the Ivory Coast has sent prices higher, as have a series of weak harvests there and in Ghana.
There have also been concerns that speculators have been distorting the cocoa market in recent weeks, with brokers writing a protest letter to Liffe.
"This speculation only serves to increase volatility and uncertainty," Fairtrade Foundation spokeswoman Barbara Crowther told the UK’s Daily Telegraph.
"Part of the problem in recent 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."
Liffe is a market that trades contracts in commodities such as cocoa, wheat, sugar, corn and coffee.

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