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July 26, 2010

Major cocoa trader plans more Africa farming investments

by Richard Tyler and Laura Roberts

Anthony Ward, the UK-based financier who has just paid £658m for cocoa beans, is among a growing group of hedge fund owners, which also includes American George Soros, who are acquiring food production capacity in Africa.

Mr Ward is betting the growth in the world's population – it numbers 6.8bn today and is expected to reach 7bn in the next two years and more than 9bn by 2050, according to United Nations projections – and a decline in available cropland will push up prices.

Armajaro's food plans include setting up a private equity fund later this year that will invest in ports and roads, farmland and storage facilities in Africa, as well as schools and other infrastructure. Cocoa will remain a key target commodity, but Mr Ward is also building up his sugar trading operations.

"Food will go to a price where it encourages these developments," Mr Ward has said of the trend toward farmland acquisition and food-related investing. "If you're long food, it will give you good returns."

The plan follows Armajaro Holdings' acquisition of 241,000 tonnes of cocoa beans last week – the equivalent of almost the entire supply of the commodity in Liffe-registered warehouses across Europe.

It is a big bet by a company that made $6.1m (£4m) pre-tax profits on $1.4bn in sales in the 13 months to September 2009. Armajaro and its subsidiaries had short-term borrowing facilities of $480m at that date.

But Mr Ward has form. City traders first dubbed him "Chocolate Finger" in August 2002 after he acquired 204,380 tonnes of cocoa beans. Mr Ward made £40m in two months after he watched the price of cocoa increase from £1,400 a tonne to £1,600 a tonne. He told The Daily Telegraph in 2002: "We are not trying to inflate the market."

If Mr Ward holds the cocoa for long enough he could force manufacturers to raise the price of chocolate bars. He has so far declined to comment about his plans. Cocoa prices rose by 0.7pc last week to peak at £2,732 per metric tonne – the highest price for cocoa in Europe since 1977. The rise follows a series of weak harvests in Ghana and the Ivory Coast, two of the largest suppliers.

Armajaro, which is one of Europe's top three cocoa traders by volume, has made no secret of its desire to increase physical delivery of cocoa. It said in its latest accounts that it planned "to develop its physical commodities business by further expanding its sourcing operations to enable it to supply its customers with increasing quantities of traceable commodities".

Chairman Martin Lampert said the group's commodities trading subsidiary was benefiting from "a significant shift in the cocoa industry towards the sourcing of traceable and sustainable products, with several major chocolate manufacturers announcing their intention to source accordingly".

He added that Armajaro's trading business had capitalised on this trend and would "continue to develop infrastructure in existing and new origin countries to support this demand".

The Financial Services Authority regulates three of Armajaro's businesses and launched an inquiry into the 2002 trade. Its findings were never made public. Last month European cocoa traders lobbied Euronext Liffe to re-examine the issue, claiming that speculators were distorting the market.

Anthony Ward began his career as a motorcycle dispatch rider before becoming a commodities trader at Salomon Smith Barney’s Phibro London trading arm, specialising in cocoa and coffee.

He left in 1998 and set up Armajaro Holdings with Richard Gower in 2000.

It has grown to become one of the three largest cocoa commodity traders in the world.

Its highest-paid director received a salary of $8.5m (£5.5m) last year, $1m more than in 2008.

Mr Ward is the former chairman of the European Cocoa Association and has amassed up to 15pc of the world’s cocoa stocks in the last 10 years. Worth around £36m, he lives in Mayfair in London with his wife, Carolyn. Outside of work he is known to be a passionate rally driver and lover of fine food

and wines. One of Armajaro’s first actions was to buy a vineyard in Paarl, South Africa.

Mr Ward manages Armajaro’s flagship CC+ Fund, which specialises in cocoa and coffee. He achieved a double-digit growth in the value of the fund in the year to September.

His fund forms part of Armajaro Asset Management, which has over $1.5bn under management.

Armajaro’s other funds include the Czar+ sugar and bioethanol fund and Armajaro Emerging Markets, which was launched in August last year.


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