Wednesday, July 28, 2010

Now it's getting personal...

On July 17th, this story appeared in the British newspaper The Telegraph: "Mystery trader buys all Europe's cocoa".

According to The Telegraph:
Even Willy Wonka might struggle to use this much chocolate. Yesterday, somebody bought 241,000 tonnes of cocoa beans.

The purchase was enough to move the entire global cocoa market, sending the price to the highest level since 1977, and triggering rumours and intrigue in the City.

It is unclear which person, or group of traders, was behind the deal, but it was the largest single cocoa trade for 14 years.

The cocoa beans, which are sitting in warehouses either in The Netherlands, Hamburg, or closer to home in London, Liverpool or Humberside is equivalent to the entire supply of the commodity in Europe, and would fill more than five Titanics. They are worth £658 million.

Analysts said it was very unlikely that a chocolate company, such as Nestle or Kraft, or even their suppliers, would buy such a huge order in one go and that is was probable that one or a number of speculators, possibly hedge funds, had attempted to corner the market. By doing this, they would have control of the entire supply in Europe, forcing the price yet higher.

Eugen Weinberg, an analyst with Commerzbank, said: “For one buyer it would likely be a little bit too large. It would be a crazy number. That said, if you’re cornering the market ...”

“If it looks like cornering, feels like cornering and the price difference between Europe and the US is so large, it probably is cornering.”
This is the kind of speculation that has led to such volatility in world markets in recent years. Gamblers seeking "something for nothing." In the end, it's "the little people" who pay the price. Those not playing the markets, those who merely depend upon "free markets" to establish a fair price. That's most of us.

To all those who rage against President Obama and his "socialist agenda" I really have to ask, "is Capitalism working for you?"

See also, an interesting Democracy Now discussion of Frederick Kaufman's article "The Food Bubble: How Wall Street Starved Millions and Got Away With It." He tells how Goldman Sachs entered the wheat futures market on a purely speculative basis and helped push a four-fold increase in worldwide wheat prices. The story appears in the July edition of Harper's

No comments: