Where Did All The Armajaro/Anthony Ward Headlines About Cornering Cocoa Go?


“…terrifyingly bullish…” was the quote that stands out for me. Where did all these headlines go? One minute you had some jammy dodger in London who was going to kill your Valentine’s Day plans and then nothing.

Such is the life of reading the headlines about commodity traders and the wild positions they take. It’s a drag that the papers don’t have qualified journalists who actually know something about the commodity markets. The good ones are way too inside baseball. One that I like to read is John Kemp at Reuters.

Here’s the story the broke the news back on July 16 in the Financial Times:

Low inventories could drive prices higher if demand remains strong. Cocoa hit a high of £2,732 a tonne this week and some dealers say it could now top £3,000 a tonne. “It reminds us of 1976,” said one senior cocoa trader. In 1977 prices spiked above £3,300.

Armajaro appears to believe that the market is going to spike significantly higher by September, traditionally the tightest period of the year as chocolatiers ramp up production ahead of Christmas and the main West African crop has not yet come to market.

Although stocks of cocoa exist in warehouses not registered on any exchange, the delivery to Armajaro represents almost all the 270,000 tonnes of available stocks at Liffe-registered warehouses.

“The question is: what happens to those stocks?” said another trader. “Are they going to be marketed? If not, it becomes terrifyingly bullish.”

Well, we know that Mr. Ward has his beans on ice — literally — they are being refrigerated. Just because the contracts are lower than where he took delivery, does not mean he’s lost anything on the trade. He could have hedged, sold it forward, or engaged in a swap transaction.

The red circle on the graph above indicates the contract around the time Mr. Ward took delivery. That was around July 18, or “18 July” if you do things backwards like they do in London. (I’m heading to London soon btw.) Since then, the contracts have sold lower and it doesn’t look like anyone cares about his alleged hoarding (which it’s not).

Don’t believe everything that you read. It’s what’s not written that you miss…

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