"Trouble in Candyland" - Cocao bean price fixing underway?

http://news.yahoo.com/video/business-15749628/trouble-in-candyland-...

I am not sure who has seen this news story or if anyone can really validate what the impacts of this are to the bottom line of chocolate based products. Either way, I see trouble on the horizon.....

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Permalink Reply by Andy Ciordia on July 20, 2010 at 3:02pm

Definitely not enough details. Iif you are bulk buying market/basic auction beans vs if you are a specialty shop that has a relationship with a farm--I doubt you'll notice. The big buyers might feel it but it will take some time to come down the pipe to where farms will renegotiate their prices.

Plus a hedge fund is just that, a hedge.. they could end up on the losing end and then they push their beans into the market and cause a massive fall in prices.

Too early to tell, watch and ponder your sources.

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Permalink Reply by Sebastian on July 20, 2010 at 3:55pm

I can't view the video through our corporate firewall, but if the story is in relation to the EU hedge fund buying up stocks of physical inventory, it could be a big deal. He's done it a few times before, with mixed success (on his part). The issue is that EU buys to a different grade than does the US, and hoarding beans in an environment where quality is already on the decline is going to result in bean buyers likely being willing to pay more for alternate origins in an attempt to secure the appropriate quality, and they'll address flavor via a number of techniques that i'm not going to go into. He's using a sophisticated (for a hedge manager) combination of crop forecasting, demand projections, regional socio-economic modelling, and political/legislative monitoring to come to the conclusion that the timing is to his advantage to do this.

It's a gamble on his part, no doubt, but based on some decent assumptions. He doesn't have the depth of insight that, well, others embedded in the industry might have, but that doesn't mean his data is flawed. The down side of him having an up side, is that for bean users, it'll likely result in a significant increase in bean, butter, and powder prices across the boards for many origins.