Armajaro Dumps Cocoa Horde At A Loss

Dec 17 2010 | 9:36am ET

Armajaro Asset Management's bold bid to corner the cocoa market has come to a bittersweet end this holiday season.

The London-based commodities hedge fund bought up nearly all of the available stocks of cocoa this summer, some 240,000 metric tons of the brown stuff. It was the largest cocoa delivery on London's LIFFE exchange in 13 years and 20 times as large as the previous delivery, representing some 7% of annual production.

Armajaro's bet looked pretty good at first, helping to drive cocoa to a 33-year high. But you can't predict the weather—and you certainly can't predict the weather in the Ivory Coast from London. But the African country, which produces about 40% of the world's cocoa, enjoyed some good weather, at least for cocoa production, helping ease the market and sending cocoa prices in London down by almost £1,000 per metric ton.

Armajaro sold off its entire stake between September and this month. The hedge fund was responsible for the delivery of most of the 109,960 metric tons of cocoa delivered this month, the Financial Times reports.

While the chocolate bet was a bust for Armajaro and co-founder Anthony Ward, nicknamed "Choc Finger" by the British press, the firm's CC+ fund remains up for the year, thanks both to its successful hedging of the long cocoa bet and the success of the other half of its portfolio, which invests in coffee.

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