As the London-based trading house and commodities hedge fund Armajaro took delivery of almost all of Europe’s cocoa, pundits and producers alike started referring to “Chocofinger.” Comparisons between Armajaro’s Anthony Ward and the James Bond villain Goldfinger – who sought to corner the world’s market in gold by robbing Fort Knox – seem a bit overdone, though.
Ward has already seen the value of his 241,000 ton cocoa horde drop 5 percent in the past two days, a theoretical loss of 33 million pounds (about $50 million).
A group of European cocoa processors wrote a letter to the NYSE Liffe futures exchange, alleging a manipulation which “is bringing the London market into disrepute.” The producers believe that big traders like Armajaro are cornering the market and forcing cocoa futures to a 33-year high.
The exchange, however, replied that, “While we are sensitive to the points you have made regarding market volatility, from our investigations there is no evidence of abusive behaviour or that any market participant is trading with the specific purpose of distorting the price of the July 2010 delivery month.”
Indeed, Armajaro isn’t a pure speculator, betting on the market. It represents a genuine middle-man, buying cocoa from the world’s major producers and selling it to processors in Europe and around the world.
However the Armajaro saga plays out, it certainly won’t be running out of cocoa any time soon, with seven percent of the world’s annual production under its control.