Indiana Grain Company, LLC

Posted: 07/19/10

By: tomgrisafi

When we at Indiana Grain turn to chocolate... it's usually for a snack.

Perhaps we should be more observant of the big boy commodity traders who now do much more than just eat the sweet product.

The Financial Times of London is reporting that more traders than ever are dabbling in coco. Some, of course, are "dabbling" much bigger than others.

Anthony Ward, the commodities trader whose UK group Armajaro Holdings bought $920 million in cocoa on Friday, is obviously bullish on chocolate. And that’s why his investment group had 240,100 tons of cocoa beans, the main ingredient in chocolate, shipped to them last week. The purchase constitutes the largest single buy up of cocoa in the last 14 years.

According to the publication, the move has also spurred fears of a chocolate shortage come September. The Armajaro purchase represents the equivalent of almost the entire supply of cocoa in Euronext Liffe-registered warehouses across Europe.

So why such a big bet on chocolate? Simply put, Mr. Ward and Armajaro are incredibly bullish on food.

“Food will go to a price where it encourages these developments,” Mr Ward told the UK’s Telegraph newspaper earlier this year, speaking about the trend toward farmland acquisition and food-related investing. “If you’re long food, it will give you good returns.”

Chocolate in particular looks like it has some sweet returns still in store for investors. Cocoa prices hit a 32-year high last week. And with the world’s largest cocoa harvest coming in September (from West Africa) any disruption there could drive prices higher.