Cocoa speculator gets his fingers burned

British financier's major paper losses on £658m purchase

It was a bad week for Choc Finger. The British financier Anthony Ward, dubbed Choc Finger by the British press after he cornered a £658 million chunk of the world's cocoa market, suffered major paper losses when the price of cocoa for September delivery dropped 7.3 per cent this week. It fell each of the past three days to end at US$2,935 a tonne.

London-traded cocoa has gained 25 per cent in the past year, partly on forecasts of higher demand as the global economy recovers. It reached a 10-week high on July 16. Beans from Ivory Coast and Ghana, the world's largest growers, are heading for warehouses in Europe, possibly easing a shortage that drove prices higher, said Andreas Christiansen, the managing director at the supplier Hamburg Cocoa and Commodity Office.

In the week that ended on July 13, net-long positions held by hedge-fund managers and other large speculators in New York cocoa futures dropped for the first time in three weeks. "Speculative froth is leaving the market," Carsten Fritsch, an analyst with Commerzbank in Frankfurt, told Bloomberg. Last week's 5.6 per cent rally was "largely speculator driven", he said. There are few speculators more active than Mr Ward. According to reports in the British press, the hedge-fund manager specialises in cocoa investing and recently loaded up on 241,000 tonnes of cocoa beans.

Unlike most commodity investors, who deal in contracts and not the underlying product, he actually took delivery of the beans and now reportedly holds enough to manufacture 5.3 billion quarter-pound chocolate bars. The beans are believed to be stored in warehouses around London and other UK cities. Market observers suspect he is stockpiling beans to force the price up. * with Bloomberg [e-mail]