Trader’s Cocoa Binge Wraps Up Chocolate Market

Yusuf Ahmad/Reuters
Cocoa beans are dried in South Sulawesi, Indonesia. A London firm has bought up so much cocoa that candy makers are nervous.


LONDON — To some, he is a real-life Willy Wonka. To others, he is a Bond-style villain bent on taking over the world’s supply of chocolate.
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Anthony Ward aka " Chocolate Finger "
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Anthony Ward, the cocoa trader, in a rally race in Kenya in 2003. He once drove from London to Cape Town.

In a stroke, a hedge fund manager here named Anthony Ward has all but cornered the market in cocoa. By one estimate, he has bought enough to make more than five billion chocolate bars.

Chocolate lovers here are crying into their Cadbury wrappers — and rival traders are crying foul, saying Mr. Ward is stockpiling cocoa in a bid to drive up already high prices so he can sell later at a big profit. His activities have helped drive cocoa prices on the London market to a 30-year high.

Mr. Ward, 50, is not some rabid chocoholic, former employees say. He simply has a head for cocoa. And, through his private investment firm, Armajaro, he now controls a cache equal to 7 percent of annual cocoa production worldwide, a big enough chunk to sway prices.

“Globally, he is unmatched in his knowledge of cocoa,” said Tim Spencer, a former Armajaro executive.

Armajaro maintains offices in West Africa, helping Mr. Ward keep tabs on major cocoa crops. “We even have our own weather stations — our very own that no one else has in some parts of the world,” Mr. Ward, soft-spoken and tan, said in a video interview this year with a financial news service.

Now, traders here are buzzing that Mr. Ward has placed an audacious $1 billion bet in the London market for cocoa futures. This month, he bought 241,100 metric tons of beans, they say.

His play has some people up in arms. While some see it as a simple bet that cocoa prices will rise on falling supply, others say Mr. Ward has created a shortage of cocoa simply to drive up the price himself.

The German Cocoa Trade Association and others wrote an angry letter to the London exchange on which cocoa is traded, demanding that it take action against what the association characterized as a “manipulation.”

The British news media has christened Mr. Ward “Chocolate Finger,” a nod to the Bond villain Auric Goldfinger. And on Facebook, someone has created a “Choc Finger” page featuring Mr. Ward’s face superimposed on a pig that is bellying up to the trough.

The fear is that Mr. Ward will become the go-to source until the annual cocoa harvest, which starts in October. With candy makers starting to stock up for the holiday season, they may be forced to pay him ever-higher prices — and cocoa has already jumped 150 percent since 2008.

“The squeeze was really timed perfectly,” said Eugen Weinberg, an analyst at Commerzbank in Frankfurt.

Mr. Ward and his firm, which has not acknowledged buying the cocoa contracts, declined to comment for this article.

Attempts to corner a particular market come and go in the rough-and-tumble world of commodities trading. During the 1970s, Nelson Hunt and his brother, William, tried but failed to corner the world market in silver.

While Mr. Ward lords over the world of cocoa, he is a bit of a mystery outside of that universe. Former employees, acquaintances and peers say that, in person, he does not fit his villainous nickname, and characterize him as friendly and intelligent.

Despite rattling the markets with large investments, Mr. Ward prefers to keep a low profile.

After working as a motorcycle courier, Mr. Ward was introduced to commodities in 1979, when he became a trainee for the tea, rice, cocoa and rubber operations at the conglomerate Sime Darby.

He first made his mark in cocoa with a big bet in the mid-1990s, when he was at Phibro, then the commodity trading arm of Salomon Smith Barney.

Mr. Ward opened his own firm in 1998 with another founder, Richard Gower. Its name, Armajaro, is a mixture of their four children’s names.

Mr. Ward’s appetite for risk extends beyond the cocoa market. He is also an avid rally racer who once drove a red 1947 Allard sports car thousands of miles in a race from London to Cape Town. He plans to race in a similar rally in January in a 1971 Ford Escort.

His fellow driver will be Mark Solloway, who was badly injured in a crash involving Mr. Ward in 2002 in Poland. When Mr. Solloway ended up in a local hospital, a distraught Mr. Ward, who had been driving their car, arranged for a private jet to fly him to London for treatment.

“He’s the greatest and most generous person,” Mr. Solloway said.

Mr. Ward lives with his wife and two sons in a four-story red-brick town house in the upscale Mayfair district of London. A brisk, 15-minute walk away are Armajaro’s offices, housed in a Georgian mansion with marble floors, soaring ceilings and a courtyard.

At first, Armajaro focused solely on cocoa. Later, it started trading coffee and then other agricultural commodities.

Today, Armajaro manages more than $1.5 billion in assets, mostly in hedge funds. But through another business, it remains one of the world’s largest suppliers of cocoa. It has buying operations in the Ivory Coast, Indonesia and Ecuador.

By most accounts, Mr. Ward profited handsomely by orchestrating a similar cocoa squeeze in 2002. That move, which earned him his chocolate-themed nicknames, caught the attention of financial regulators here, but their findings were never made public.

This time, seeing an even bigger investment, some cocoa organizations complained to the exchange, threatening to take their trades elsewhere. In a letter, the exchange said its investigations had turned up “no evidence of abusive behavior.” A spokesman for the exchange declined to comment further.

In any case, chocolate lovers should not worry too much, analysts said. Cocoa accounts for only about 10 percent of the price of most ordinary chocolate bars.

The situation could change, however, if the next cocoa harvest falls short of expectations — or if Mr. Ward keeps buying.

“That really scares us. That he would double up the bet and buy more September contracts,” said a London cocoa trader who asked that his name not be used because he might want to do business with Armajaro in the future. Still, the trader seemed in awe of Mr. Ward’s play, adding: “If I had the guts and money, I would do that, too.”

Julia Werdigier reported from London, and Julie Creswell from New York

Fearing higher chocolate prices
Published on : 23 July 2010 - 2:30pm | By Maarten Stultjens (Photo: Flickr)
More about: Africa Armajaro Holdings chocolate Eveline Raijmans Fair Trade Ivory Coast news the Netherlands Tony Chocolonely
Bars of chocolate may be going up in price in the coming months. That’s because Armajaro Holdings has just bought up 240,000 ton of cacao beans. Companies like Tony Chocolonely, which produces Dutch fair trade chocolate, are not happy.

Eveline Raijmans, director of Tony Chocolonely, fears it will affect the price of cacao. For the past five years her fair trade company has been campaigning to improve the cacao and chocolate market, so that cacao farmers get more money and slavery is banned. What does she think of the biggest cocoa purchase in 14 years made by Armajaro, a large trader in cocoa, coffee and tea?

”It’s really a huge amount. Around 25 to 30 percent of the entire harvest of a country like the Ivory Coast. That’s the largest cocoa producing country in the world, responsible for an average of 60 percent of the supply. When somebody buys so much cacao in one go, I assume it’s speculation.”

Ivory Coast
Cocoa is a fast growing market. Also in Asia the demand for chocolate is increasing. Will the supply be able to keep up? The majority of cocoa beans are produced in West Africa, especially in the Ivory Coast.

"In 2004 there was a civil war, the situation was very unstable. It has become quieter now, but little has been invested in the cocoa plantations. Everybody is worried about the supply."

Not transparent
There are only two markets where cocoa beans are traded: New York and London. If a quarter of the supply from the Ivory Coast has been bought up, all the other dealers have to fight over the rest. This means that consumers will end up paying more for their chocolate. Ms Raijmans expects the price of a 200 gram bar of chocolate to increase by as much ten to 20 euro cents.

She thinks the cocoa market is not transparent. The umbrella organisation for cocoa dealers, the ICCO, is also calling for more transparency.

"In Africa it’s all quite clear: the farmers sell their beans to middlemen or corporations. They are then transported to the harbour and shipped off. I presume it continues the same way it used to for bananas. They can, so to speak, be sold ten times before the cargo is unloaded in the harbour of Amsterdam, which is still the largest cocoa port."

Supermarkets
Most Dutch supermarkets don’t make their own chocolate, but just buy the product. They work with contracts that are renewed every few months.

“But at the beginning of the year you make your own contracts with your buyers, the supermarkets. That’s when you have to determine a price. You cannot change these prices every week.”

Choc finger: Meet the real-life Willy Wonka who's just bought an incredible £658m of cocoa beans...
By CHRISTOPHER LEAKE and ROB COOPER

A British financier who dramatically cornered a huge chunk of the world’s cocoa supply has been dubbed ‘Choc Finger’ by City traders.
Anthony Ward, 50, who has amassed a £36 million fortune, is a real-life Willy Wonka and now owns enough beans to manufacture 5.3 billion quarter-pound chocolate bars.
The holding is so massive it threatens to force manufacturers to raise the price of some of Britain’s most popular chocolate.

Chocolate financier Anthony Ward has been dubbed 'Choc finger' by City traders

Armajaro Holdings, a hedge fund founded by multi-millionaire Mr Ward, pulled off the £658 million purchase of 241,000 tons of cocoa beans.
It is likely that the mountain of beans will be held in warehouses in London, Liverpool, Humberside and Holland.
The move was the largest single cocoa purchase for 14 years and came as bean prices rose to the highest level since 1977 – £2,732 per ton.
The purchase has surprised commodity dealers because, in a highly unusual move, Mr Ward’s firm has actually taken delivery of the beans.
According to industry sources, in 98 per cent of transactions, traders exchange contracts which give them the option to buy and sell cocoa at various prices and at different times without ever taking possession of the stock.
The move has prompted speculation that Mr Ward is stock-piling huge volumes of cocoa in order to exert a stranglehold over supply and force the price even higher.

A cocoa farmer in the Ivory Coast. West Africa is the world's main producer of the commodity
Public school-educated Mr Ward began life as a motorcycle dispatch rider before making his fortune as a commodity trader.
He made cocoa his speciality and ten years ago began amassing control of up to 15 per cent of the world’s stocks.
In 2002, Mr Ward made millions when he pulled off a deal similar to his current gamble.
He purchased 204,000 tons of cocoa at a time when supply was limited because of poor harvests and political instability in the equatorial area of West Africa – the world’s main cocoa production area. Mr Ward made more than £40 million in just two months after the price of the commodity rose steeply from £1,400 a ton to £1,600 a ton.
Besides his affinity with chocolate, Mr Ward appears to share little in common with the eccentric Mr Wonka, dreamed up by children’s writer Roald Dahl and played by Johnny Depp in the 2005 film Charlie And The Chocolate Factory.
Mr Ward and his wife Carolyn enjoy a life of luxury thanks to his cocoa deals. They live in an £11 million six- storey Georgian town house in Mayfair, Central London.
The mansion, which boasts four reception rooms, five bedrooms with en suite bathrooms, a self-contained staff suite, passenger lift to all floors, a terrace and patio, covers a massive 5,947 square feet.
Mr Ward’s annual director’s salary is £3.4 million.
The product of a military family, he began as a trainee trader at City brokers Hutton before going on to make a name for himself at a series of famous trading companies.
The financier enjoys fine food and wines and fast cars. He is an enthusiastic rally driver when he is not adding to his fortune, suffering a spectacular crash in Poland in 1992 before he made his riches.
One European broker said of Mr Ward: ‘He is a true Englishman. He not bolshie or aggressive. And he doesn’t take himself terribly seriously.’
Mr Ward’s firm has offices and agricultural investments all over the world. Armajaro, which was founded in 1998, had an annual turnover of £929 million last year and made a profit of £17 million. It employs 486 staff.
How the rest of the chocolate industry is reacting to Mr Ward’s latest deal was unclear last night. A spokesman for Cadbury’s said: ‘We never comment on future marketing plans.’
A Nestle spokesman added: ‘We do not comment on future marketing strategies.’
Under EU rules a milk chocolate bar must consist of at least 25 per cent cocoa solids, while a dark bar must consist of at least 35 per cent.
Mr Ward was unavailable for comment last night. His housekeeper said: ‘He is not here and I don’t know when he is going to be back.’


Read more: http://www.dailymail.co.uk/news/article-1295608/Choc-finger-Meet-real-life-Willy-Wonka-Anthony-Ward-whos-just-bought-incredible-658m-cocoa-beans-.html?ito=feeds-newsxml#ixzz0ueYTpywo

By chance Blut, have you ever been to the Hershey Park Complex in Pennsylvania? As a child on a class trip, I have fond memories of seeing a display that mentioned cacao from the DR. This agricultural product as well as other high price commodities should be within the DR's vision for the future export expansion. A well diversified agricultural sector looking to higher market businesses should be stressed. Good to top quality and efficient production will meet the taste of an aging but demanding Western and Eastern world clientele.

This story atabey has serious repercussions for DR agriculture
How a Hedge Fund Manager (or Villain?) Is Cornering the Chocolate Market
JUL 26 2010, 2:01 PM ET | Comment

Anthony Ward is known as "Chocolate Finger," after the notorious James Bond villain. And rightfully so, since chocolate lovers are sure to be angry as word gets out that the U.K. hedge fund manager has been accused of driving up global cacao prices by stockpiling a cache equal to 7 percent of annual global production, or enough to make more than 5 billion bars. The New York Times, which notes that Ward is not just "some rabid chocoholic," reports:
His play has some people up in arms. While some see it as a simple bet that cocoa prices will rise on falling supply, others say Mr. Ward has created a shortage of cocoa simply to drive up the price himself.

The German Cocoa Trade Association and others wrote an angry letter to the London exchange on which cocoa is traded, demanding that it take action against what the association characterized as a "manipulation."

The British news media has christened Mr. Ward "Chocolate Finger," a nod to the Bond villain Auric Goldfinger. And on Facebook, someone has created a "Choc Finger" page featuring Mr. Ward's face superimposed on a pig that is bellying up to the trough.

The fear is that Mr. Ward will become the go-to source until the annual cocoa harvest, which starts in October. With candy makers starting to stock up for the holiday season, they may be forced to pay him ever-higher prices -- and cocoa has already jumped 150 percent since 2008.

"The squeeze was really timed perfectly," said Eugen Weinberg, an analyst at Commerzbank in Frankfurt.

The Cocoa Corner: Is Choc Finger Down $150 Million?
July 26, 2010 | about: NIB

In a front page story on Sunday, the New York Times suggests that commodity investor Anthony Ward may be trying to corner the cocoa market. Ward–known as Choc Finger–reportedly purchased 241,000 tons of cocoa, about 7% of the world’s annual crop. The price tag? A cool $1 billion.

The NYT suggests that Ward is doing this to profit from future price increases, either natural or created by his new market power:

His play has some people up in arms. While some see it as a simple bet that cocoa prices will rise on falling supply, others say Mr. Ward has created a shortage of cocoa simply to drive up the price himself. … The fear is that Mr. Ward will become the go-to source until the annual cocoa harvest, which starts in October. With candy makers starting to stock up for the holiday season, they may be forced to pay him ever-higher prices — and cocoa has already jumped 150 percent since 2008.

“The squeeze was really timed perfectly,” said Eugen Weinberg, an analyst at Commerzbank in Frankfurt.

The corner theory is plausible, but I think the NYT committed journalistic malpractice by not reporting another salient fact: cocoa prices are now about 15% lower than when Choc Finger made his play. Ward allegedly bought at a price around 2,700 British pounds per ton of cocoa, but according to the FT the futures contract for September closed on Friday at only 2,300 pounds:



If Choc Finger’s game is to profit from future price increases, he’s sitting on $150 million in unrealized losses. Not a sweet outcome.

Of course, that arithmetic applies only if Choc Finger is playing buy-and-hold with his cocoa stash. There are many other ways he might be trying to profit from his purchase. Perhaps he owned July futures that paid off handsomely from the run-up in price (as you can see in the FT chart, July was the front-month contract until July 15th, after which the September contract, at a much lower price, took over). Or maybe he locked in higher prices from pre-arranged sales? As Craig Pirrong notes, pre-negotiated sales make good sense if you are trying to execute a corner (Paul Krugman offers another simple model). Those details matter, but you wouldn’t know it from the NYT story. (My guess, by the way, is that he’s not down $150 million, although the logic of the NYT story would suggest that. But only time will tell.)

Whatever Ward’s motivation, keep in mind that big purchases don’t always pay off. Sometimes you win, sometimes you lose. As Choc Finger knows first hand, according to Amsterdam Trader:

Press is reporting the “biggest cocoa trade in fourteen years”, but it’s not that special. Back 2002 the same cacao king Anthony Ward bought 202.000 tons, just a little less compared to the current 241.000. At the time his purchase represented 5% of the world market. He made 40 million in 2002 on the trade. Three years ago Ward was quoted as the chocolate guru : “The world’s not going to run out of cocoa, but they’ll have to pay more to get the right beans”. Most press reports refer to the biggest cocoa trade in fourteen years, but haven’t done any more research. The large cocoa trade in 1996 was done by the firm Phibro, amounting 300.000 tons. In charge of the cocoa desk at the time at Phibro, was nobody else than the same Anthony Ward. Phibro lost money on this cocoa trade by the way, and was forced to unwind their positions.

Man in the News: Anthony Ward
By Javier Blas
Published: July 23 2010 21:20 | Last updated: July 23 2010 21:20
Anthony Ward may have craved chocolate as a child but there was little in the early career of this mild-mannered commodities trader that marked him out as a future “Chocfinger” as he has been dubbed this week after his devilishly brilliant trades in the cocoa market.

His coup sounds extraordinarily glamorous. Prices of the basic ingredient of chocolate rose to their highest level in 33 years after his hedge fund amassed a large chunk of the world’s stocks of cocoa beans. Some have seen him as the 21st-century equivalent of Nelson and William Hunt, the brothers who cornered the silver market in 1979-1980 by taking control of most of the world’s inventories of the metal. Since then, many have seen raw materials’ markets, from crude oil to cocoa, as a playground for greedy traders and an easy platform for artificially inflating prices at the expense of the consumer. By linking the 50-year-old Mr Ward to the James Bond super-villain, Goldfinger some have insinuated that he is the ultimate ruthless speculator.

But the reality is more prosaic – as so often with exotic commodities sagas. His chocolate triumph is not the result of a snap buccaneering move, but follows decades of immersing himself in the cocoa business.

Born into a military family at the heart of the British establishment, he attended Marlborough College, one of the UK’s elite private boarding schools. On leaving school he went straight to work in London as a trainee at Sime Darby, the Malaysian-owned plantation company in 1979 where his first job was sampling tea. But a year later, when he joined London-based brokerage firm E.F. Hutton, he turned by chance to cocoa. He has retained his fascination with chocolate’s primary ingredient and Africa, the heart of cocoa production, ever since.

At E.F. Hutton he was an apprentice who had to battle for clients against competition from more than 100 other cocoa traders and brokers in Europe and the US. Those were the long gone days of old-fashioned commodities trading: the era of telex rooms and exotic travel to civil-war torn African countries. It was a world of doing business over dinners in which Mr Ward, with his appreciation of good food and fine wine, was at ease. He rapidly progressed, ending up at Phibro, the legendary commodities arm of Salomon Smith Barney, where he rose to head cocoa and coffee trading.

Three decades after his induction into the world of cocoa, his competitors and acquaintances describe him as the most influential trader in the market. Even rivals say that rather than being a speculator he is in fact the ultimate analyst, one who believes in thorough research. His perfectionism led Armajaro, the trading house and hedge fund manager he co-founded in 1998, to deploy staff every year to Ivory Coast, the world’s largest cocoa producer, to count cocoa pods to gain an edge over rivals in forecasting the size of the crop. To the same end, he set up a network of weather stations.

Notwithstanding his attention to detail, his chocolate career has had ups and downs. In 1996, he amassed a huge position in cocoa in London, taking delivery of 300,000 tonnes of beans – at that time equal to 10 per cent of the crop – betting that Ivory Coast’s crop would under-perform. The harvest surged, and he suffered large losses as prices declined.

But by 2002, it was clear Ivory Coast was in deep trouble, as Mr Ward had predicted. After half a century of almost uninterrupted expansion, the Ivorian cocoa machine, which accounts for nearly 40 per cent of global supplies, was faltering. Trees were getting old and sick and the country was immersed in a civil war. Mr Ward decided to bet big and took delivery of 148,000 tonnes of cocoa, profiting as prices surged. Cocoa, which in January 2002, traded at £1,000 a tonne peaked at £1,600 a tonne by October. The surge, he told the Financial Times then, was not a bubble – nor, he insisted, was he a speculator.

“It is fundamentally based,” he explained at Armajaro’s offices in Mayfair, London’s most exclusive neighbourhood, where he also lives with his wife and two children. “You cannot simply take delivery of cocoa and make the price double. It is simply not possible,” he added.

It is no different this time, allies say he argues. Cocoa fundamentals have been pointing to higher prices for the last four years and Mr Ward made clear months ago that Armajaro’s flagship hedge fund CC+, which he manages, was bullish. After a string of bad crops in west Africa, global cocoa demand, propelled by the rich countries’ love for chocolate, has outpaced supply for the last four years in a row, the largest shortage since the late 1960s. The multi-national food companies that depend on a reliable, cheap supply of the commodity are worried. The publicity-shy cocoa industry has started talking about a “chocolate crisis”.

Against the background of buoyant prices the bullish Mr Ward put his money where his mouth was. A rival trader says: “Anthony is the best cocoa trader and most people do not have his appetite for risk.”

Traders believe that last October he started buying cocoa futures contracts for delivery in July 2010, slowly building a huge position. Probably, rivals say, he paid on average about £2,100-£2,200 a tonne. When contracts expire, a trader can choose to take physical delivery rather than a cash settlement. By the time this contract expired this month, prices had surged to a 33-year high of £2,732. Armajaro shocked many in the market by taking physical delivery of 240,100 tonnes, the biggest delivery in 14 years, equal to 7 per cent of the world’s crop. A group of small cocoa processors protested bitterly, blaming speculation for the price surge.

He is said to argue now as he did in 2002, that all he has done is go to the futures market “to buy cocoa in the most efficient and low-risk way possible”. The trade is likely to bring a stream of profits to Armajaro, particularly if the new Ivorian crop, due in October, disappoints.

Even if prices decline, Mr Ward is unlikely to suffer. A competitor who knows him well has no doubt he will have hedged his position. One admiring executive says: “No one knows the cocoa market better than Anthony.”

So maybe not Chocfinger – but the “king of cocoa” or even of chocolate seem just about right.

July 27, 2010, 2:30 PM
Choc Finger
Nickname bestowed on a British fund manager who bought a vast quantity of cocoa beans.

Writing for news.com.au, Edmund Tadros revealed that a London Hedge Fund – Armajaro Holdings – had purchased, and taken delivery of, 241,100 tonnes of cocoa beans:

The buy is worth about $1.14 billion and constitutes the biggest amount of cocoa – a key ingredient of chocolate – in 14 years to be physically delivered on the NYSE Liffe market.

Tadros calculated that this is enough cocoa for some 5.3 billion small chocolate bars, and noted:

It is not the first time that Anthony Ward, a co-founder of Armajaro Holdings, has made a speculative cocoa bean play.

Mr Ward, who has been dubbed “Choc finger” by the British press, has tried the tactic at least twice before, The Wall Street Journal reports.

In 2002, Mr Ward bought cocoa beans worth almost £300 milllion ($520 million) and sold it for a $US17 million ($19.3 million) profit, according to reports at the time.

But another cocoa bet in 1996 of 300,000 tonnes ended with his then-firm unwinding the trade after a cocoa bean price slump.

Chocolate Finger
I should cocoa
Kit-Kat in his lap and laughing manically, Choc-finger sits on his foil-encrusted throne, surrounded by mountains of stockpiled cocoa beans. His dark plan: to drive chocolate prices through the roof by hoarding the key ingredient in his evil lair, sending the world into a treat-starved frenzy only he can quell. The swine!

Ok, not quite. This is, however, how Britain’s popular press would like us to think of hedge fund manager Anthony Ward, awarding him the ‘Choc-finger’ moniker after he last week purchased 240,100 tonnes of cocoa beans in anticipation of a spike in prices. The natural enemy to Ian Fleming’s famous secret agent (the name’s Bond, Fixed-rate Bond), Choc-finger is of course a riff on James Bond villain Goldfinger, one of cinema’s best-known baddies.

The British media – never one to pass up the chance to create a good scoundrel – may have missed the point (inaccurately reporting Ward’s transaction as a morally dubious futures trade), but then, with the latest Bond film stuck in development hell, perhaps it was just too good an opportunity to add a bit of colour to the world of finance. After all, even financial journalists get bored sometimes