Nicknamed after a Bond villain, hedge fund boss Anthony Ward was shaken and stirred by a disastrous bet
He is one of London's most infamous speculators, with a James Bond villain-style nickname and a reputation for cornering markets in cocoa and coffee. But has an ill-judged bet by the commodity trader known as Chocfinger triggered a chain of events that could bring down the price of our cappuccinos?
For anyone who has followed the career of Anthony Ward, the hedge fund boss almost universally known by his intriguing pseudonym, the idea that the consumer could benefit from his actions, albeit by accident, might shock.
He became well known outside the City three-and-a-half years ago when prices of cocoa– the basic ingredient in chocolate – rose to their highest level in 33 years after his company amassed a large chunk of the world's supply of beans. The episode, following a similar heist in 2002 when he gobbled up 15% of world stocks, cemented his nickname as his methods seemed to echo those of Ian Fleming's Auric Goldfinger, who planned to corner the global gold supply.
Chocfinger always denied he was attempting to corner the market, but the episodes allowed many to paint the world's raw materials markets as a playground for ruthless speculators, whose fiendish methods allow them to profit by artificially inflating prices at the expense of the consumer. However, real life trading does not always fit so neatly into that set narrative.
The Observer has established that Belgian competition authorities are considering reopening an investigation into the workings of another of Chocfinger's favoured markets – coffee – an interest triggered by a disastrous bet that saddled the commodity trader with tens of thousands of tonnes of coffee, worth hundreds of millions of pounds, which he could not access. The deals are thought to have cost him millions of pounds and contributed to the slumping performance of part of his empire, Armajaro Trading, where profits have collapsed and which he sold for just $1 (61p) last week. Without that physical trading arm, Chocfinger must now concentrate on his hedge fund business that bets on coffee and cocoa price movements on behalf of clients.
The potential Belgian probe revolves around the country's ancient city of Antwerp, where the port dates back to the 12th century and about half the world's tradeable coffee is housed. Furthermore, the regulatory interests seem to mirror similar investigations into the workings of metals markets, as well as coinciding with efforts by those running the coffee and cocoa markets to review their own rules.
Still, despite all the sudden activity, nobody seemed particularly upset by the coffee market two years ago. The inflow of coffee into Antwerp – by far the largest storage point for green (pre-roasted) coffee beans in the world – continued as it had for centuries, driven by Europe's unquenchable thirst for the beverage, as well as Antwerp's historic shipping links and the warehouse keepers' low initial storage charges.
Yet in late 2011, Armajaro lodged a complaint with the Belgian competition council, alleging that an Antwerp-based warehouse company – then called Port Real Estate (PRE) – which was holding much of his coffee was abusing a dominant position. It was a seminal move.
One Belgian regulator involved in the case explains: "On the world market, the huge amounts of raw coffee stored in the port of Antwerp, especially in PRE's warehouses, are a very important buffer between demand and supply of coffee at the world level: demand for coffee at world level is still rising, slowly but steadily, while supply is subjected to external shocks such as bad harvests in important producing countries such as Brazil and Vietnam.
"So in the case of natural disasters and poor harvests, balance between supply and demand at world level requires that the huge quantities stored in Antwerp could be loaded out at a fast rate. The actual loading out rate of PRE at that time would have taken several months, even more than a year. In that way, the price of our cup of coffee was really at stake."
Chocfinger's company alleged that beans housed with PRE were being released at a deliberately slow pace, a practice which allowed the warehouse keepers to extract extra rents. PRE denied that the rate was contrived, but the sluggish process seems to have prevented Armajaro from fulfilling orders, while the stocks also depreciated in value. It is not exactly clear how great Chocfinger's losses were from this entire episode, but Armajaro described them as serious.
If the results of that episode were immediate on Armajaro, the effects of its filing continue to be felt. Armajaro's complaint was upheld and led to the imposition of interim measures compelling PRE to unload coffee from its warehouse at a set rate.
New rules on unloading speeds were then introduced by the London International Financial Futures and Options Exchange (Liffe), the commodity exchange on which contracts for robusta beans, which are predominantly used for instant coffee, are traded. The London exchange also announced a review into its warehousing rules in October – but the Belgian authorities still appear to believe the market is worth another look.
Meanwhile in New York, the IntercontinentalExchange Group, which deals in most of the trade of the arabica bean used for ground coffee, introduced new charges aimed at smoothing the workings of the market in March. Its acquisition of Liffe is also thought likely to bring about changes in how warehouse keepers operate.
Wim Dillen, business development manager at the Antwerp Port Authority, insists that many of the problems with the warehouse keepers, who rent space at the port, have now been solved. However, he concedes: "I can imagine that competition authorities want to take a look. That's their job."
Arabica now trades at around $1.15 a pound in New York, having hit lows of $1.11 last month after a bumper crop in South America flooded the market, while robusta costs around $1,800 a tonne in London (about 90 cents a pound). As to whether the efforts of regulators to bring down these prices and make our cups of coffee cheaper might be applauded, that depends on who you ask.
Tom Helsen and Isabelle Van Echelpoel opened their coffee shop, Caffe Mundi, among the Renaissance and Gothic architecture of Antwerp's old town at the beginning of the month. They roast beans on site – 40% are sourced from the city's port – which you would expect them to want to buy as cheaply as possible. But, like many things in this market, the position is more nuanced.
"Coffee is cheaper than two years ago, but it is going back up," Helsen says. "We don't want it too cheap – if the prices are too low, the farm owners get less money for the coffee. This results in lower quality. But, of course, we don't want the price too high as customers will not be too happy and may not consume as much coffee any more." Reported by guardian.co.uk 2 days ago.
He is one of London's most infamous speculators, with a James Bond villain-style nickname and a reputation for cornering markets in cocoa and coffee. But has an ill-judged bet by the commodity trader known as Chocfinger triggered a chain of events that could bring down the price of our cappuccinos?
For anyone who has followed the career of Anthony Ward, the hedge fund boss almost universally known by his intriguing pseudonym, the idea that the consumer could benefit from his actions, albeit by accident, might shock.
He became well known outside the City three-and-a-half years ago when prices of cocoa– the basic ingredient in chocolate – rose to their highest level in 33 years after his company amassed a large chunk of the world's supply of beans. The episode, following a similar heist in 2002 when he gobbled up 15% of world stocks, cemented his nickname as his methods seemed to echo those of Ian Fleming's Auric Goldfinger, who planned to corner the global gold supply.
Chocfinger always denied he was attempting to corner the market, but the episodes allowed many to paint the world's raw materials markets as a playground for ruthless speculators, whose fiendish methods allow them to profit by artificially inflating prices at the expense of the consumer. However, real life trading does not always fit so neatly into that set narrative.
The Observer has established that Belgian competition authorities are considering reopening an investigation into the workings of another of Chocfinger's favoured markets – coffee – an interest triggered by a disastrous bet that saddled the commodity trader with tens of thousands of tonnes of coffee, worth hundreds of millions of pounds, which he could not access. The deals are thought to have cost him millions of pounds and contributed to the slumping performance of part of his empire, Armajaro Trading, where profits have collapsed and which he sold for just $1 (61p) last week. Without that physical trading arm, Chocfinger must now concentrate on his hedge fund business that bets on coffee and cocoa price movements on behalf of clients.
The potential Belgian probe revolves around the country's ancient city of Antwerp, where the port dates back to the 12th century and about half the world's tradeable coffee is housed. Furthermore, the regulatory interests seem to mirror similar investigations into the workings of metals markets, as well as coinciding with efforts by those running the coffee and cocoa markets to review their own rules.
Still, despite all the sudden activity, nobody seemed particularly upset by the coffee market two years ago. The inflow of coffee into Antwerp – by far the largest storage point for green (pre-roasted) coffee beans in the world – continued as it had for centuries, driven by Europe's unquenchable thirst for the beverage, as well as Antwerp's historic shipping links and the warehouse keepers' low initial storage charges.
Yet in late 2011, Armajaro lodged a complaint with the Belgian competition council, alleging that an Antwerp-based warehouse company – then called Port Real Estate (PRE) – which was holding much of his coffee was abusing a dominant position. It was a seminal move.
One Belgian regulator involved in the case explains: "On the world market, the huge amounts of raw coffee stored in the port of Antwerp, especially in PRE's warehouses, are a very important buffer between demand and supply of coffee at the world level: demand for coffee at world level is still rising, slowly but steadily, while supply is subjected to external shocks such as bad harvests in important producing countries such as Brazil and Vietnam.
"So in the case of natural disasters and poor harvests, balance between supply and demand at world level requires that the huge quantities stored in Antwerp could be loaded out at a fast rate. The actual loading out rate of PRE at that time would have taken several months, even more than a year. In that way, the price of our cup of coffee was really at stake."
Chocfinger's company alleged that beans housed with PRE were being released at a deliberately slow pace, a practice which allowed the warehouse keepers to extract extra rents. PRE denied that the rate was contrived, but the sluggish process seems to have prevented Armajaro from fulfilling orders, while the stocks also depreciated in value. It is not exactly clear how great Chocfinger's losses were from this entire episode, but Armajaro described them as serious.
If the results of that episode were immediate on Armajaro, the effects of its filing continue to be felt. Armajaro's complaint was upheld and led to the imposition of interim measures compelling PRE to unload coffee from its warehouse at a set rate.
New rules on unloading speeds were then introduced by the London International Financial Futures and Options Exchange (Liffe), the commodity exchange on which contracts for robusta beans, which are predominantly used for instant coffee, are traded. The London exchange also announced a review into its warehousing rules in October – but the Belgian authorities still appear to believe the market is worth another look.
Meanwhile in New York, the IntercontinentalExchange Group, which deals in most of the trade of the arabica bean used for ground coffee, introduced new charges aimed at smoothing the workings of the market in March. Its acquisition of Liffe is also thought likely to bring about changes in how warehouse keepers operate.
Wim Dillen, business development manager at the Antwerp Port Authority, insists that many of the problems with the warehouse keepers, who rent space at the port, have now been solved. However, he concedes: "I can imagine that competition authorities want to take a look. That's their job."
Arabica now trades at around $1.15 a pound in New York, having hit lows of $1.11 last month after a bumper crop in South America flooded the market, while robusta costs around $1,800 a tonne in London (about 90 cents a pound). As to whether the efforts of regulators to bring down these prices and make our cups of coffee cheaper might be applauded, that depends on who you ask.
Tom Helsen and Isabelle Van Echelpoel opened their coffee shop, Caffe Mundi, among the Renaissance and Gothic architecture of Antwerp's old town at the beginning of the month. They roast beans on site – 40% are sourced from the city's port – which you would expect them to want to buy as cheaply as possible. But, like many things in this market, the position is more nuanced.
"Coffee is cheaper than two years ago, but it is going back up," Helsen says. "We don't want it too cheap – if the prices are too low, the farm owners get less money for the coffee. This results in lower quality. But, of course, we don't want the price too high as customers will not be too happy and may not consume as much coffee any more." Reported by guardian.co.uk 2 days ago.