Chocolate King Anthony Ward Cuckoo for Cocoa, Magnet for Controversy

July 28, 2010— -- Dubbed "Chocolate Finger" years ago by the U.K. press, London-based trader Anthony Ward earlier this month is believed to have bought $1 billion worth of cocoa beans -- 241,100 metric tons, or roughly 7 percent of global production, according to the Financial Times.

And while neither Ward nor anyone at his London-based firm, Armajaro Holdings, will confirm the brazen bet on rising cocoa prices, traders on the NYSE LIFFE exchange in London have fingered the 50-year-old Ward as the only man in the commodities futures market capable of taking delivery of that much cocoa.

Still, despite the attention being paid to Ward, featured on the front page of the New York Times on Sunday, cocoa traders and chocolate industry members here in the U.S. are shrugging off his supposed move, insisting that any fears of a ripple-effect spike in the price of chocolate are overblown.

"I'm not losing any sleep over it," said Jim Goldman, president of Godiva, a high-end chocolate maker acquired in 2008 by Turkish conglomerate Yildiz Holding. "In the scheme of things, we don't see cocoa prices rising sharply. If anything, I view this guy's bet as positive statement about the demand for chocolate."

"If you make chocolate, you get used to price swings so this is not something I am going to pay much attention to," said Gary Whitt, owner of Buffalo, N.Y.-based Ko-Ed Candies. "If I pay $3 a pound and the price goes up 10 cents I'll eat it, but I'll make it up next year or the year after that when the price goes back down. I'm not going to raise prices."

Veteran cocoa trader and financial blogger Michael Martin said that while Ward's story makes for sweet headlines and clever Willy Wonka comparisons, there are a number of factors that undercut the notion of this being a plot to corner the world's cocoa bean supply.

For starters, Martin pointed out, on the day in mid-July that word of the king-sized cocoa delivery began to circulate, cocoa futures that trade in the U.S. (on the ICE exchange) fell sharply. Also, Ward's firm, in addition to trading futures, is in the business of wholesaling physical cocoa beans to industry members.

"It's not as sexy when you think of it as 'cocoa wholesaler takes delivery for redistribution to large clients,' which I suspect is the case here," Martin said.

Cocoa Prices to Drop, Not Rise?

One New York trader dismissed the cocoa cornering as a non-event, even predicting lower cocoa prices.

"Despite the sensationalistic headlines, the cocoa market shows no signs of technical overheat," commodities trader Adam Grimes of Waverly Advisors said. "There are several typical price patterns that are characteristic of supply-constrained markets; none of these patterns are visible in cocoa today. In fact, the recent price action is more indicative of an intermediate term top and may suggest lower prices to come in the near future."

Cocoa prices, which have risen more than 100 percent in the past year, are not the only factor dictating what consumers pay for chocolate, said Judy Ganes-Chase, who runs a commodities advisory firm, J. Ganes Consulting, based in Katonah, N.Y. Milk prices, which have also been rising in recent years, also get factored in, and there's been no drastic increase in the price of chocolate bars during this period.

"If anything, chocolate makers will reduce the size of their products, which I suppose will be good for people like myself who eat too much chocolate," Ganes-Chase said.

The biggest factor in cocoa prices is political strife in the Ivory Coast region of Africa, the largest producer of cocoa. Instability in the Ivory Coast above all else drives cocoa prices, Ganes-Chase said.

Godiva's Goldman said the company has been ramping up production as part of a push into more supermarket-ready products, such as Godiva gems. He thinks demand for chocolate, even in a recession, has never been stronger.

"We're buying more beans than ever," he said. "And we have no plans to raise prices."