Firm's excess cocoa buying sparks price rise fears

21 August 2002
More news

22 August 2002 | Robin Parker

Cocoa buyers could be forced to pay more for their beans after a trading group was found to have bought excess amounts of last season's crop.

Confectioners have accused London-based trading firm Armajaro of trying to squeeze the market after it was revealed it bought about three-quarters of the cocoa delivered on the Eurotext Liffe exchange in the season to July. The cocoa, bought on the futures market over the course of the season, represents about 5 per cent of global supplies.

Consumption has outstripped production for the past two years, causing concern that continuing low supplies will raise the price at which Armajaro can sell the cocoa.

One senior buyer for a major confectioner said stocks were declining and that if the squeeze continued, companies would be forced to pay above the odds to meet consumer needs.

"In theory, you can always get beans, but if you have to look elsewhere for them, it will be at a premium," he told SM.

"Retailers are cutting prices and they will fight us tooth and nail if we raise the price of our products. We can't make less chocolate, so if this continues, we'll have to pay up."

A recent report from ED&F Man predicted a 2.5 per cent fall in cocoa output and a drop in cocoa grindings by 7 per cent in 2001-02.

Prices have more than doubled over the past two years, and are currently at a 15-year high of more than £1,300 per tonne.

Alan Brewer, an economist at the International Cocoa Organisation, said: "Buyers want to know what the supplies will be next season, and this is the time of year when prospects for producers are being looked at. The difficulty is that the shortage is from a mixture of origins, and all prices will be affected."

No one from Armajaro was available for comment.

SMaug2002

LATEST
JOBS
Hounslow, Heathrow /Richmond upon Thames
Competitive salary depending on experience plus generous share award
Tails.com
London
GBP40000 - GBP50000 per annum + Excellent Benefits Package
Bramwith Consulting
SEARCH JOBS
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates
GO TO CIPS KNOWLEDGE