Monday, July 19, 2010

Watch Out Willie Wonka!

The price of European chocolate is about to rise, and that means chocolate everywhere may become more expensive as a result.  On Friday somebody cornered the European cocoa market.  They bought 241,000 metric tonnes of cocoa beans sitting in certified warehouses around Europe, the largest single trade in 14 years, worth over $1.3 billion U.S.  Normally cocoa futures are bought and sold to hedge prices for producers and consumers, but on Friday whoever bought the futures contracts elected to actually take delivery rather than take a paper gain as is usually the case.  But the producers (African in this case) have already been paid, and the consumers (European confectioners in this case) have not bought yet because the price of cocoa has been at an all-time high.  Well, guess what?  This deal indicates higher cocoa prices to come, as whoever bought all that cocoa squeezes every last cent out of it on resale.  The Hunt brothers failed to corner the silver market several decades ago, but now we'll get to see what happens when a commodity does get monopolized.  So, if you are a chocaholic (especially all of you in our burgeoning European audience), load up or switch to milk chocolate which is only 25% cocoa.  Where do you get those chocolate milk cows anyway?