The world of chocolate is facing such immense cocoa shortages that the wild trading lured an unlikely player: Pierre Andurand, a hedge-fund manager best known for his bets on oil.. At that point, many speculators were calling it quits and slashing their bullish wagers. That’s when Andurand saw an opportunity to go long.
For the world’s chocolate makers, the crisis is here. Plants have been forced to shutter from Malaysia to Germany and Chicago. Firms that were caught on the wrong end of the rally are getting snarled in lawsuits. And now, a lack of liquidity also means that the market’s next stage is likely to be riddled with erratic price moves that raise the specter of company failures.
The torrid pace of the increases has driven out scores of investors who don’t want to get caught flat-footed. And more importantly, many can no longer afford to trade — the cost for margin calls to back a firm’s position has skyrocketed. Women from ivory coast working in the countryside for cocoa production. The workers are extracting and washing cocoa beans in order to dry them
Andurand has said his firm expects global cocoa bean production to decline by at least 18% on an annual basis. Prices offered to growers are set by governments in both countries, which locks in sales a year in advance. As a result, growers are being paid way less than the prices set in the international market and can’t respond nimbly to supply and demand changes.