Martin Vander Weyer’s Any Other Business
A London hedge fund, Armajaro, has cornered the market in cocoa, for which prices have already risen by 150 per cent over two years. Armajaro is reported to have paid £650 million to take delivery of 240,000 tonnes of beans, all the cocoa there is in Europe in fact, and no one seems to know what they plan to do with it — other than reap a huge profit. This is the sort of trade that earned hedge funds a bad name two years ago, when grain and soy prices soared — though investment banks, which regard ‘soft commodities’ as one more asset class for their traders to punt around in, also had a slice of the action. Behind the price peaks in the summer of 2008 were real supply shortages as a result of poor harvests and crop diseases, but the surge was clearly amplified by speculative activity. And when it was followed by food riots from Abidjan to Jakarta, many commentators, including me, pointed out that filthy-rich Mayfair hedgies really shouldn’t be seen using the staple diet of the world’s poor as gambling chips. Since the financial crisis kicked in, the hedgies have kept their heads down — and even been praised for behaving more sensibly than some of the banks — but Armajaro’s cocoa corner has provoked a new wave of protests on behalf of African farmers. You might think a rising price is good for them, but it’s not if it’s a temporary distortion that leads to falling demand from chocolate makers and is inevitably followed by a crash.
And there are a couple of other angles to this story. Artisan chocolate making has become a booming British cottage industry in recent years (there’s a chocolatier exercising his craft in a former farmyard a stone’s throw from my Yorkshire garden) and it would be a pity to see a thriving small business sector set back.
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