Anthony Ward's Sweet Tooth Has Cost Him $230 Million

   Anthony Ward is probably ruing his $1 billion cocoa purchase back in July. Since news leaked of Ward's activity, the price of cocoa has fallen by 23% as the market digests a stronger crop out of the Ivory Coast. This decline in cocoa prices means Ward has lost about $230 million. Ward's investment thesis was that weather conditions would negatively impact supply from the Ivory Coast, which produces approximately 50% of world cocoa production. So far this has not occurred. The only major news in the cocoa market today was the announcement by the International Cocoa Organization, which upped expected cocoa demand by 3,000 tons. Overall the ICCO estimates the cocoa market will be in deficit of 72,000 tons during 2010-2011. As we speculated earlier, these kinds of market corners rarely work as the market starts to trade against your position leading to large losses. The real question is how much pain can Ward take before he liquidates his cocoa position?

From Dow Jones:

 ICE Dec cocoa futures fell to new 13-month lows Thursday morning on follow-through sales. The market continues to decline amid expectations for a larger Ivory Coast crop, with bearish technicals also providing pressure. The market remains extremely oversold and due for a bounce. ICE warehouse stocks fell 21,210 bags to 3.567 million bags.
"The weather still looks pretty good out there," says Jack Scoville, analyst and vice president at Price Futures Group in Chicago. While there has likely been producer buying near the lows, most end-users have covered current needs, he says. The path of least resistance remains lower for futures prices.
The global cocoa deficit will widen to 72,000 metric tons in 2010-11, due to increased demand for chocolate, the International Cocoa Organization says. World cocoa grindings--a measure of demand--are seen rising to 3.632 million tons in 2009-10, up 3,000 tons from a previous forecast, the ICCO says.


1 comment: