In July, I posted several comments on the attempt by Anthony Ward of Armajaro to corner the cocoa futures market by purchasing seven percent of the world supply of cocoa beans. Well, it turns out that he lost his bet. Rather than continue to increase, cocoa futures prices are down. Dramatically down, to be specific. When Ward bought his 240,410 tons, he paid about £2,700/ton. As of September 13, the London price of cocoa has dropped to £1,847. His stocks of cocoa have therefore lost about £205 million in value since July.
The hedge funds operated by Armajaro have lost about 6% of their value since the purchase according to the Wall Street Journal. And Financial Advisor Shawn Hackett explains in Minyanville that such attempts almost always occur when markets are at historic highs and that markets frequently go down right after such purchases. “It’s unbelievable. You hear it over and over again — “This time it’s different, this time it’s bullish,” but it never is. It inevitably ends in disaster,” Hackett is quoted.
So much for cornering the market.