© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
July 23, 2010 9:20 pm
Anthony Ward may have craved chocolate as a child but there was little in the early career of this mild-mannered commodities trader that marked him out as a future “Chocfinger” as he has been dubbed this week after his devilishly brilliant trades in the cocoa market.
His coup sounds extraordinarily glamorous. Prices of the basic ingredient of chocolate rose to their highest level in 33 years after his hedge fund amassed a large chunk of the world’s stocks of cocoa beans. Some have seen him as the 21st-century equivalent of Nelson and William Hunt, the brothers who cornered the silver market in 1979-1980 by taking control of most of the world’s inventories of the metal. Since then, many have seen raw materials’ markets, from crude oil to cocoa, as a playground for greedy traders and an easy platform for artificially inflating prices at the expense of the consumer. By linking the 50-year-old Mr Ward to the James Bond super-villain, Goldfinger some have insinuated that he is the ultimate ruthless speculator.
But the reality is more prosaic – as so often with exotic commodities sagas. His chocolate triumph is not the result of a snap buccaneering move, but follows decades of immersing himself in the cocoa business.
Born into a military family at the heart of the British establishment, he attended Marlborough College, one of the UK’s elite private boarding schools. On leaving school he went straight to work in London as a trainee at Sime Darby, the Malaysian-owned plantation company in 1979 where his first job was sampling tea. But a year later, when he joined London-based brokerage firm E.F. Hutton, he turned by chance to cocoa. He has retained his fascination with chocolate’s primary ingredient and Africa, the heart of cocoa production, ever since.
At E.F. Hutton he was an apprentice who had to battle for clients against competition from more than 100 other cocoa traders and brokers in Europe and the US. Those were the long gone days of old-fashioned commodities trading: the era of telex rooms and exotic travel to civil-war torn African countries. It was a world of doing business over dinners in which Mr Ward, with his appreciation of good food and fine wine, was at ease. He rapidly progressed, ending up at Phibro, the legendary commodities arm of Salomon Smith Barney, where he rose to head cocoa and coffee trading.
Three decades after his induction into the world of cocoa, his competitors and acquaintances describe him as the most influential trader in the market. Even rivals say that rather than being a speculator he is in fact the ultimate analyst, one who believes in thorough research. His perfectionism led Armajaro, the trading house and hedge fund manager he co-founded in 1998, to deploy staff every year to Ivory Coast, the world’s largest cocoa producer, to count cocoa pods to gain an edge over rivals in forecasting the size of the crop. To the same end, he set up a network of weather stations.
Notwithstanding his attention to detail, his chocolate career has had ups and downs. In 1996, he amassed a huge position in cocoa in London, taking delivery of 300,000 tonnes of beans – at that time equal to 10 per cent of the crop – betting that Ivory Coast’s crop would under-perform. The harvest surged, and he suffered large losses as prices declined.
But by 2002, it was clear Ivory Coast was in deep trouble, as Mr Ward had predicted. After half a century of almost uninterrupted expansion, the Ivorian cocoa machine, which accounts for nearly 40 per cent of global supplies, was faltering. Trees were getting old and sick and the country was immersed in a civil war. Mr Ward decided to bet big and took delivery of 148,000 tonnes of cocoa, profiting as prices surged. Cocoa, which in January 2002, traded at £1,000 a tonne peaked at £1,600 a tonne by October. The surge, he told the Financial Times then, was not a bubble – nor, he insisted, was he a speculator.
“It is fundamentally based,” he explained at Armajaro’s offices in Mayfair, London’s most exclusive neighbourhood, where he also lives with his wife and two children. “You cannot simply take delivery of cocoa and make the price double. It is simply not possible,” he added.
It is no different this time, allies say he argues. Cocoa fundamentals have been pointing to higher prices for the last four years and Mr Ward made clear months ago that Armajaro’s flagship hedge fund CC+, which he manages, was bullish. After a string of bad crops in west Africa, global cocoa demand, propelled by the rich countries’ love for chocolate, has outpaced supply for the last four years in a row, the largest shortage since the late 1960s. The multi-national food companies that depend on a reliable, cheap supply of the commodity are worried. The publicity-shy cocoa industry has started talking about a “chocolate crisis”.
Against the background of buoyant prices the bullish Mr Ward put his money where his mouth was. A rival trader says: “Anthony is the best cocoa trader and most people do not have his appetite for risk.”
Traders believe that last October he started buying cocoa futures contracts for delivery in July 2010, slowly building a huge position. Probably, rivals say, he paid on average about £2,100-£2,200 a tonne. When contracts expire, a trader can choose to take physical delivery rather than a cash settlement. By the time this contract expired this month, prices had surged to a 33-year high of £2,732. Armajaro shocked many in the market by taking physical delivery of 240,100 tonnes, the biggest delivery in 14 years, equal to 7 per cent of the world’s crop. A group of small cocoa processors protested bitterly, blaming speculation for the price surge.
He is said to argue now as he did in 2002, that all he has done is go to the futures market “to buy cocoa in the most efficient and low-risk way possible”. The trade is likely to bring a stream of profits to Armajaro, particularly if the new Ivorian crop, due in October, disappoints.
Even if prices decline, Mr Ward is unlikely to suffer. A competitor who knows him well has no doubt he will have hedged his position. One admiring executive says: “No one knows the cocoa market better than Anthony.”
So maybe not Chocfinger – but the “king of cocoa” or even of chocolate seem just about right.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in