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$1B cocoa bean purchase pushes price up to 33-year high

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Steve Chiotakis: One man has bought up a large part of the world’s supply of cocoa. Usually hedge funds buy and sell small bits of
commodities like coffee or cocoa, but British investor Anthony Ward has just taken delivery of $1 billion worth of cocoa beans. It’s the largest single purchase in 14 years and has pushed the price of cocoa up to a 33-year high. The BBC’s Rebecca Singer reports for Marketplace.

Rebecca Singer: Imagine five ships the size of the Titanic filled with cocoa beans. That’s what 240,000 tons looks like and it’s equivalent to Europe’s entire supply of chocolate’s most vital ingredient.

Chris Skinner is a markets commentator and says Anthony Ward has done this before. Eight years ago, he bought 200,000 tons and made $60 million.

Chris Skinner: I guess it’s a bit like the film Trading Places with Eddie Murphy, that you know, the pork bellies — if you control that supply, you hold onto it, and you squeeze the market. You see the price going up and at some point release those supplies, and then you make a mint.

Cocoa prices have more than doubled over the past two and a half years. Production in Africa has fallen and demand from India and China has gone up. And Ward is betting on them rising further, especially in the run up to Christmas. But critics aren’t impressed:

Tim Jones: We see this speculation all the time in food markets, in coffee,in wheat. And this has real impacts on people across the world.

Tim Jones is from the World Development Movement. He says ordinary people in developing countries are pushed into poverty as food prices rise. The new financial reform bill in the U.S. is designed to control the influence speculators can have on the market, and Jones wants the European Union to make similar reforms:

Jones: So the market can still function, but the limit prevents the hot money coming in and out and so helps to stabilise the prices.

Chocolate lovers might not thank Ward for helping push up the price of their chocolate bars, but warehouse owners will certainly be licking their lips.

In London, I’m the BBC’s Rebecca Singer for Marketplace.

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