The London cocoa exchange yesterday cleared traders of "abusive behaviour" after prices last week hit a 33-year high of £2,732 per tonne.
Cocoa processors across the global industry complained that the price was being hiked by "speculation" after Armajaro – a commodities hedge fund – earlier this month took delivery of an eye-watering 240,000 tonnes of beans.
The delivery represents nearly all Europe's cocoa inventories, equivalent to about 7 per cent of the annual global cocoa crop and enough to make more than five billion chocolate bars.
Armajaro's massive delivery resulted from the trading group's buying of July cocoa futures and then holding them until their expiry.
In response to widespread complaints, NYSE Liffe, which operates the cocoa exchange, yesterday said there was no evidence of any wrong-doing. "While we are sensitive to the points you have made regarding market volatility, from our investigations there is no evidence of abusive behaviour or that any market participant is trading with the specific purpose of distorting the price of the July 2010 delivery month," the exchange said in a letter to a group complaining of excessive speculation in the futures.
The exchange will meet the group in London next week to discuss the situation further, and NYSE Liffe has also agreed to publish regular reports on the number of contracts held by traders.
Cocoa prices fell for a third consecutive day in London yesterday, helped by arrivals from Brazil, Ivory Coast and Ghana. But prices have risen by a quarter in the past year, buoyed by expectations of global economic recovery. Armajaro's founder, Anthony Ward, has been warning for some time of rising prices because of production problems in Ivory Coast, where 40 per cent of global cocoa is grown.Reuse content