1 00:00:03,120 --> 00:00:08,360 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:10,400 --> 00:00:13,360 Speaker 2: Hi have you, Hey, how are you guys? We're good? 3 00:00:13,480 --> 00:00:16,439 Speaker 2: How are you? No bad? And no complain? 4 00:00:17,200 --> 00:00:20,479 Speaker 3: You know, olive oil prices are high, chocolate prices are high. 5 00:00:20,520 --> 00:00:25,079 Speaker 3: I mean you're in demand, maybe in demand, but certainly 6 00:00:25,120 --> 00:00:26,600 Speaker 3: I'm just gonna be ruined this. 7 00:00:26,760 --> 00:00:30,440 Speaker 4: Right, what's happening with all of oil prices? 8 00:00:30,920 --> 00:00:33,560 Speaker 3: They have come down about ten percent. I mean we're 9 00:00:33,600 --> 00:00:36,440 Speaker 3: at the peak of the crop has just arrived, so 10 00:00:36,479 --> 00:00:39,440 Speaker 3: it's it's normal that the prices come down a bit 11 00:00:39,520 --> 00:00:41,720 Speaker 3: and demand is starting to react. I mean, it just 12 00:00:41,800 --> 00:00:43,200 Speaker 3: it's just bloody expensive. 13 00:00:43,400 --> 00:00:49,320 Speaker 1: Hey, this is like Javier's personal CPI basket, rightil and coco. 14 00:00:49,680 --> 00:00:52,199 Speaker 3: I mind the waiting of those two items on my 15 00:00:52,240 --> 00:00:55,760 Speaker 3: personal CPI basket. It's just coco and olive oil, probably 16 00:00:55,840 --> 00:01:00,080 Speaker 3: one hundred and forty percent of it. 17 00:01:00,240 --> 00:01:09,920 Speaker 4: I did a deadlift one. 18 00:01:01,560 --> 00:01:07,320 Speaker 1: Two uh barges. 19 00:01:07,440 --> 00:01:09,480 Speaker 4: This isn't after school special, except. 20 00:01:09,240 --> 00:01:11,760 Speaker 1: I've decided I'm going to base my entire personality going 21 00:01:11,800 --> 00:01:15,040 Speaker 1: forward on campaigning for a strategic pork reserve in the US. 22 00:01:15,120 --> 00:01:16,840 Speaker 4: Where's the best with Impasta? 23 00:01:17,040 --> 00:01:19,600 Speaker 1: These are the important question. Is it robots taking over 24 00:01:19,640 --> 00:01:20,000 Speaker 1: the world? 25 00:01:20,080 --> 00:01:22,920 Speaker 4: No, I think that like, in a couple of years, 26 00:01:23,080 --> 00:01:25,399 Speaker 4: the AI will do a really good job of making 27 00:01:25,400 --> 00:01:28,760 Speaker 4: the odd Launch podcast, and people say, I don't really 28 00:01:28,760 --> 00:01:30,600 Speaker 4: need to listen to Joe and Tracy anymore. 29 00:01:30,840 --> 00:01:31,720 Speaker 2: We do have. 30 00:01:33,520 --> 00:01:37,120 Speaker 4: Perfect welcome to lots more? Will we catch up with 31 00:01:37,160 --> 00:01:39,120 Speaker 4: friends about what's going on right now? 32 00:01:39,520 --> 00:01:42,759 Speaker 1: Because even when odd Loots is over, there's always lots 33 00:01:42,800 --> 00:01:43,840 Speaker 1: more and. 34 00:01:43,840 --> 00:01:48,880 Speaker 4: We really do have the perfect guest Tracy, do you 35 00:01:48,880 --> 00:01:51,000 Speaker 4: have opinions on chocolate? Do you have a favorite chocolates? 36 00:01:51,080 --> 00:01:51,440 Speaker 2: I don't know. 37 00:01:51,480 --> 00:01:53,920 Speaker 4: I've never askedly, I've never heard you. Actually I have. 38 00:01:54,440 --> 00:01:58,560 Speaker 4: I'm expecting a long list of exotic flavors and names. 39 00:01:58,760 --> 00:01:59,800 Speaker 1: Are you ready for my ted? 40 00:02:00,360 --> 00:02:00,640 Speaker 2: Yes? 41 00:02:00,840 --> 00:02:02,400 Speaker 1: Well, you see, when people ask if you have a 42 00:02:02,440 --> 00:02:04,640 Speaker 1: favorite chocolate, I feel like you have to divide that 43 00:02:04,720 --> 00:02:09,480 Speaker 1: into different price baskets. Actually, so, my favorite cheap chocolate 44 00:02:09,600 --> 00:02:11,919 Speaker 1: is actually, and this is controversial, I really like Hershey's. 45 00:02:12,080 --> 00:02:12,880 Speaker 4: Oh interesting. 46 00:02:12,960 --> 00:02:16,200 Speaker 1: I actually think like there is there's a cheap tasting 47 00:02:16,360 --> 00:02:20,000 Speaker 1: chocolate that is actually wonderful and it tastes cheap but 48 00:02:20,080 --> 00:02:23,000 Speaker 1: it's still great, and that's Hershey's. And then my mid 49 00:02:23,120 --> 00:02:26,360 Speaker 1: range is probably milk Up, which I feel like I 50 00:02:26,400 --> 00:02:28,720 Speaker 1: have to say as a half Austrian person, although that 51 00:02:28,760 --> 00:02:30,840 Speaker 1: company is Swiss and I think it's produced out of 52 00:02:30,880 --> 00:02:34,040 Speaker 1: Germany now. And then expensive chocolate. I like all of 53 00:02:34,080 --> 00:02:38,640 Speaker 1: the Swiss ones. Basically, there's that Swiss chocolate store that's 54 00:02:38,800 --> 00:02:40,000 Speaker 1: right under our office. 55 00:02:40,120 --> 00:02:41,040 Speaker 4: Yeah, what's your view on that? 56 00:02:41,440 --> 00:02:44,000 Speaker 1: It's really good? But oh my god. I went in 57 00:02:44,040 --> 00:02:46,919 Speaker 1: there to buy a present for my husband for Valentine's 58 00:02:46,960 --> 00:02:50,520 Speaker 1: Day and I grabbed like a little candy chocolate heart 59 00:02:50,600 --> 00:02:52,839 Speaker 1: thing and I was like, oh, okay, I'll just I'll 60 00:02:53,200 --> 00:02:55,480 Speaker 1: leave without looking at the price. How bad can it be? 61 00:02:55,560 --> 00:02:58,960 Speaker 1: And I got to the register thirty seven dollars and 62 00:02:58,960 --> 00:03:00,959 Speaker 1: that was in February. It's probably worse now. 63 00:03:01,240 --> 00:03:04,680 Speaker 4: Yes, so as most people know. By now, cocoa prices 64 00:03:04,720 --> 00:03:07,639 Speaker 4: have soored. And when there's a commodity soring. We talk 65 00:03:07,720 --> 00:03:11,160 Speaker 4: with our colleague Javier Blast. Do you have a favorite chocolate? 66 00:03:12,320 --> 00:03:18,200 Speaker 3: Ah, I grew up in a Spain basically with Nofelia, 67 00:03:18,320 --> 00:03:23,320 Speaker 3: which is the Spanish kind of brand of nutella. And yes, yes, yes, 68 00:03:23,360 --> 00:03:25,040 Speaker 3: I know that that's a lot of milk and sugar 69 00:03:25,080 --> 00:03:28,400 Speaker 3: and haszle nuts. But I still I will buy a 70 00:03:28,520 --> 00:03:32,239 Speaker 3: jar of you know, the Spanish nutella, and I will 71 00:03:32,280 --> 00:03:34,519 Speaker 3: not do a spread over bread. I will just get 72 00:03:34,520 --> 00:03:37,000 Speaker 3: a spoon, a bigger spoon, and then just eat it. 73 00:03:37,080 --> 00:03:41,160 Speaker 3: I'm five minutes later, then nutella is over and I'm unhappy, 74 00:03:41,240 --> 00:03:44,520 Speaker 3: and you know, within thirty seconds the guild will come. 75 00:03:44,600 --> 00:03:48,000 Speaker 3: But for for about thirty seconds, I am the happiest 76 00:03:48,120 --> 00:03:49,280 Speaker 3: guy in this planet. 77 00:03:49,680 --> 00:03:52,440 Speaker 1: Eating nutella with a spoon is one of those underrated 78 00:03:52,960 --> 00:04:07,000 Speaker 1: joys in life, I think. So we've seen this massive 79 00:04:07,080 --> 00:04:11,040 Speaker 1: run up in recent weeks which has caused comparisons to 80 00:04:11,320 --> 00:04:15,600 Speaker 1: in video of all things, So chocolate outperforming in video lately, 81 00:04:15,600 --> 00:04:17,880 Speaker 1: which is kind of ridiculous because one of those things 82 00:04:17,920 --> 00:04:20,880 Speaker 1: powers the collective brain power of the economy and the 83 00:04:20,920 --> 00:04:22,560 Speaker 1: other thing is just semiconductors. 84 00:04:22,600 --> 00:04:25,720 Speaker 4: So the one just helps, but mixed stuff up. 85 00:04:26,120 --> 00:04:28,760 Speaker 1: That's right, Okay, So why don't we start really simply 86 00:04:28,839 --> 00:04:30,159 Speaker 1: havevia what's going on here? 87 00:04:30,720 --> 00:04:34,320 Speaker 3: Well, there are two things going on simultaneously. The rally 88 00:04:34,520 --> 00:04:39,560 Speaker 3: started about a year ago completely unfundamentals. This was supply 89 00:04:39,640 --> 00:04:42,960 Speaker 3: and demand. First of all, demand has been increasing every year. 90 00:04:43,040 --> 00:04:46,719 Speaker 3: It goes with GDP, more middle class, more people like chocolate. 91 00:04:46,880 --> 00:04:49,479 Speaker 3: Who is going to complain about that? So global chocolate 92 00:04:49,560 --> 00:04:52,640 Speaker 3: consumption has more or less double over the last thirty years. 93 00:04:52,960 --> 00:04:56,680 Speaker 3: Then the main problem was a series of crop failures 94 00:04:56,760 --> 00:05:00,400 Speaker 3: in four countries in West Africa with account for roughly 95 00:05:00,480 --> 00:05:04,839 Speaker 3: seventy five percent of the world's production. That's Ghana, Ivory Coasts, 96 00:05:04,920 --> 00:05:06,839 Speaker 3: Cameroon and Nigeria. 97 00:05:07,160 --> 00:05:08,360 Speaker 2: Crop failed there. 98 00:05:08,240 --> 00:05:11,520 Speaker 3: For a number of factors, one being that prices have 99 00:05:11,560 --> 00:05:14,160 Speaker 3: been low for many years. Farmers are poor, they don't 100 00:05:14,160 --> 00:05:16,799 Speaker 3: have money to plant new trees, they don't have money 101 00:05:16,800 --> 00:05:19,839 Speaker 3: for fertilizers, they don't have money for pesticide. 102 00:05:20,000 --> 00:05:21,680 Speaker 2: So trees are all there. 103 00:05:21,720 --> 00:05:25,440 Speaker 3: They produce less every year, and old trees are also 104 00:05:25,640 --> 00:05:30,520 Speaker 3: more more vulnerable to chew issues, bad weather and diseases, 105 00:05:30,520 --> 00:05:33,159 Speaker 3: and we got both of them over the last few months. 106 00:05:33,160 --> 00:05:36,480 Speaker 3: The weather has been really bad in West Africa. I 107 00:05:36,520 --> 00:05:38,520 Speaker 3: know that a lot of people talking about the drought. 108 00:05:38,640 --> 00:05:41,760 Speaker 3: Note what really mattered was the rains. It rain a 109 00:05:41,800 --> 00:05:45,800 Speaker 3: lot last year and just when we didn't need rains, 110 00:05:46,040 --> 00:05:51,960 Speaker 3: and that really depressed the crop massively. And also at 111 00:05:51,960 --> 00:05:55,320 Speaker 3: the same time we have had a disease spreading across 112 00:05:55,320 --> 00:05:57,880 Speaker 3: Ghana and Ivory Coast that is called the swelling shoot. 113 00:05:58,440 --> 00:06:02,000 Speaker 3: Is bad because once a tree gets it, you basically 114 00:06:02,040 --> 00:06:04,360 Speaker 3: have to uproot the tree to get rid of it. 115 00:06:04,360 --> 00:06:07,320 Speaker 3: It's really bad and that has been endemic in the area, 116 00:06:07,440 --> 00:06:11,080 Speaker 3: but this season has really spread everywhere. That was the 117 00:06:11,080 --> 00:06:14,120 Speaker 3: beginning of the rally and why we went from like 118 00:06:14,400 --> 00:06:18,720 Speaker 3: two thousand, five hundred dollars to five thousand and six thousand, 119 00:06:19,080 --> 00:06:21,679 Speaker 3: but we are now a ten thousand and more has happened. 120 00:06:22,560 --> 00:06:25,919 Speaker 4: Is there any lever that can be pulled on the 121 00:06:25,960 --> 00:06:28,800 Speaker 4: supply side, like in other commodities, it's like we're going 122 00:06:28,839 --> 00:06:32,120 Speaker 4: to you know, draw some new wells or whatever it is. 123 00:06:32,120 --> 00:06:34,240 Speaker 4: Is there anything that can be done on the supply 124 00:06:34,320 --> 00:06:35,880 Speaker 4: side even in the medium term. 125 00:06:35,960 --> 00:06:37,240 Speaker 2: Well, yes and no. 126 00:06:37,480 --> 00:06:40,960 Speaker 3: I mean we're gonna have a reaction from farmers everywhere 127 00:06:40,960 --> 00:06:45,200 Speaker 3: where they're actually getting market prices. That's particularly true in 128 00:06:45,279 --> 00:06:48,599 Speaker 3: Latin America in Indonesia, and we're gonna see them bying 129 00:06:48,640 --> 00:06:51,960 Speaker 3: fertilizer by investicized and next year it provided that the 130 00:06:52,000 --> 00:06:55,240 Speaker 3: weather is better, productions would recover a lot and grow 131 00:06:55,279 --> 00:06:58,440 Speaker 3: in those countries. But to grow production, the main prot 132 00:06:58,560 --> 00:07:01,719 Speaker 3: is takes time. It takes five years since planting a 133 00:07:01,760 --> 00:07:04,440 Speaker 3: new tree to get the first you know, decent crops 134 00:07:04,440 --> 00:07:08,440 Speaker 3: from that tree, and that also requires money. But also 135 00:07:08,640 --> 00:07:13,000 Speaker 3: importantly farmers in West Africa, particularly in Ivory Coast and Ghana, 136 00:07:13,000 --> 00:07:15,360 Speaker 3: which you know they are the main producers, are not 137 00:07:15,440 --> 00:07:18,920 Speaker 3: getting anywhere the market prices. I mean, i'd best they're 138 00:07:18,920 --> 00:07:22,360 Speaker 3: getting twenty to thirty percent of the market price. So 139 00:07:22,400 --> 00:07:26,240 Speaker 3: their incentive for planting more is just very limited. To 140 00:07:26,720 --> 00:07:28,120 Speaker 3: say none, Wait have you? 141 00:07:28,280 --> 00:07:30,480 Speaker 1: I need you to do something very important right now. 142 00:07:30,520 --> 00:07:33,239 Speaker 1: I need you to walk me or talk me off 143 00:07:33,280 --> 00:07:36,240 Speaker 1: the ledge of buying a cocoa plant and putting it 144 00:07:36,320 --> 00:07:38,840 Speaker 1: in a greenhouse and trying to grow cocoa beans. Why 145 00:07:38,840 --> 00:07:41,360 Speaker 1: why shouldn't I do this? You are It's kind of 146 00:07:41,360 --> 00:07:44,240 Speaker 1: a New Years question though, why well, it's a greenhouse. 147 00:07:44,280 --> 00:07:45,240 Speaker 2: But why isn't. 148 00:07:45,000 --> 00:07:48,960 Speaker 1: There more commercial production of cocoa beans. Why haven't someone 149 00:07:48,960 --> 00:07:51,280 Speaker 1: said like, oh, we can make tons of money by 150 00:07:51,320 --> 00:07:54,240 Speaker 1: setting up some massive hydroponic farm or something. 151 00:07:54,600 --> 00:07:58,360 Speaker 3: For two reasons. One, coco trees are not easy to cultivate. 152 00:07:58,840 --> 00:08:01,640 Speaker 3: You need to basically have a very particular kind of 153 00:08:01,960 --> 00:08:06,440 Speaker 3: climatic conditions that's roughly twenty degrees north and south of 154 00:08:06,480 --> 00:08:09,600 Speaker 3: the equator. I think that you're going to struggle in 155 00:08:09,760 --> 00:08:12,520 Speaker 3: New York even you use a glasshouse, or you're going 156 00:08:12,560 --> 00:08:16,400 Speaker 3: to spend a lot of money heating on that class house, 157 00:08:16,400 --> 00:08:18,520 Speaker 3: which is probably not good. 158 00:08:18,320 --> 00:08:21,040 Speaker 2: For your wallet, neither for the environment. 159 00:08:21,080 --> 00:08:23,880 Speaker 3: But you know, maybe we can convince someone at Bloomberg 160 00:08:23,920 --> 00:08:25,560 Speaker 3: to let us just grow a coco tree on a 161 00:08:25,600 --> 00:08:26,640 Speaker 3: glasshow in New York. 162 00:08:26,760 --> 00:08:28,720 Speaker 2: That would be quite fun. But we need five. 163 00:08:28,520 --> 00:08:32,400 Speaker 3: Years to get the first coco production and I have 164 00:08:32,480 --> 00:08:36,960 Speaker 3: first dips or whatever you get. But why it's not commercial, 165 00:08:37,920 --> 00:08:40,280 Speaker 3: that's a lot of the problem. I mean, on most 166 00:08:40,640 --> 00:08:44,720 Speaker 3: agricultural commodities you have commercial plantations, you have plantation business. 167 00:08:44,960 --> 00:08:47,320 Speaker 3: Here is all the small holders, and the reason is 168 00:08:47,320 --> 00:08:49,040 Speaker 3: that no one really makes money on coco. 169 00:08:49,240 --> 00:08:50,400 Speaker 2: I mean, the only reason. 170 00:08:50,120 --> 00:08:52,280 Speaker 3: That we get a lot of coco is because it's 171 00:08:52,280 --> 00:08:55,640 Speaker 3: the only kind of exit, the strategy for millions of 172 00:08:55,720 --> 00:08:58,880 Speaker 3: poor farmers in West Africa to make some money. But 173 00:08:59,360 --> 00:09:02,960 Speaker 3: it doesn't really develop into a commercial plantation business just 174 00:09:03,000 --> 00:09:06,680 Speaker 3: because until now prices work so low that you know, 175 00:09:06,760 --> 00:09:08,920 Speaker 3: it didn't make any commercial sense to make it. 176 00:09:09,520 --> 00:09:11,640 Speaker 4: Who gets the money I think you mentioned you said 177 00:09:11,640 --> 00:09:14,080 Speaker 4: the farmers. Maybe you're only getting twenty to thirty percent 178 00:09:14,160 --> 00:09:16,960 Speaker 4: of the price of coco. Like how does it divide up? 179 00:09:17,000 --> 00:09:19,640 Speaker 4: Sort of walk us through when cocoa is bought. When 180 00:09:19,720 --> 00:09:21,360 Speaker 4: chocolate is bought, where the profits are. 181 00:09:21,280 --> 00:09:25,000 Speaker 3: Accruing, Well, everyone makes money other than the farmers, let's 182 00:09:25,000 --> 00:09:28,440 Speaker 3: put it that way. So the intermediary is make money. 183 00:09:29,280 --> 00:09:32,880 Speaker 3: The governments make money in particularly in West Africa, because 184 00:09:33,040 --> 00:09:37,000 Speaker 3: they tax coco very, very heavily. So governments are making money. 185 00:09:37,200 --> 00:09:40,680 Speaker 3: Some of the commoity traders certainly they make money. The 186 00:09:40,800 --> 00:09:45,320 Speaker 3: processes make money, and then you know, the chocolate companies, 187 00:09:45,320 --> 00:09:48,320 Speaker 3: the confectionery companies also make money. They're going to make 188 00:09:48,320 --> 00:09:50,520 Speaker 3: a bit less money because there is no way this 189 00:09:50,679 --> 00:09:52,760 Speaker 3: year that they're going to be able to pass all 190 00:09:52,760 --> 00:09:55,840 Speaker 3: the increase in coco cost to the consumers because their 191 00:09:55,880 --> 00:09:58,760 Speaker 3: sales will really slamp, and I suppose that they're going 192 00:09:58,840 --> 00:10:02,760 Speaker 3: to have to accept lower thinner margins in the next 193 00:10:02,800 --> 00:10:03,560 Speaker 3: few months. 194 00:10:03,640 --> 00:10:06,480 Speaker 2: But just as a rule of thumb. 195 00:10:06,240 --> 00:10:10,760 Speaker 3: You basically say everyone makes money barring the farmers, and 196 00:10:11,160 --> 00:10:13,240 Speaker 3: some of the governments in West Africa make a lot 197 00:10:13,280 --> 00:10:13,679 Speaker 3: of money. 198 00:10:27,200 --> 00:10:28,960 Speaker 1: So one of the things I wanted to ask you 199 00:10:29,200 --> 00:10:32,360 Speaker 1: is we've seen a lot of headlines obviously about the 200 00:10:32,360 --> 00:10:36,320 Speaker 1: price of chocolate. You know, cocoa breaking that ten thousand 201 00:10:36,320 --> 00:10:39,360 Speaker 1: dollars barrier. You know, things are bad when people start 202 00:10:39,480 --> 00:10:42,760 Speaker 1: using standard deviations. And I saw someone say that cocoa 203 00:10:42,840 --> 00:10:45,760 Speaker 1: prices had risen one hundred and twenty five percent above 204 00:10:45,800 --> 00:10:49,440 Speaker 1: their two hundred day moving average, ranking it as the 205 00:10:49,559 --> 00:10:52,960 Speaker 1: seventh most profound deviation above the long term average for 206 00:10:53,040 --> 00:10:56,400 Speaker 1: any commodity since nineteen fifty nine. So we have these 207 00:10:56,440 --> 00:10:59,480 Speaker 1: insane numbers, insane stats. You can look at the charts 208 00:10:59,480 --> 00:11:03,120 Speaker 1: and it's based straight upwards arrow, But how much of 209 00:11:03,160 --> 00:11:07,240 Speaker 1: that feeds into the actual price that people are paying 210 00:11:07,320 --> 00:11:09,240 Speaker 1: at the grocery store, Like how much of it is 211 00:11:09,280 --> 00:11:14,000 Speaker 1: financialization and being squeezed upwards by things like margin calls. 212 00:11:14,000 --> 00:11:15,960 Speaker 1: We know this is a commodity with a lot of 213 00:11:15,960 --> 00:11:18,559 Speaker 1: speculation attached to it, So I guess I'm just curious, 214 00:11:18,600 --> 00:11:20,240 Speaker 1: like how real is that number? 215 00:11:20,679 --> 00:11:24,079 Speaker 3: Well, so two questions on you know, one is how 216 00:11:24,120 --> 00:11:26,480 Speaker 3: much coco is on the chocolate that you actually buy 217 00:11:26,480 --> 00:11:29,200 Speaker 3: on the supermarket and the and the other one is 218 00:11:29,240 --> 00:11:31,880 Speaker 3: how much of the last few weeks of the rally 219 00:11:31,960 --> 00:11:34,920 Speaker 3: is actually financial factors more than supply, as I said, 220 00:11:35,480 --> 00:11:37,600 Speaker 3: More than supply and demand as I said at the beginning, 221 00:11:37,720 --> 00:11:39,880 Speaker 3: supply and demand were really the main factors at the 222 00:11:39,920 --> 00:11:42,600 Speaker 3: beginning of the rally. I will say that probably since 223 00:11:42,679 --> 00:11:47,559 Speaker 3: kind of mid January early February, financial factors have really 224 00:11:47,600 --> 00:11:49,200 Speaker 3: been a big driver. 225 00:11:49,760 --> 00:11:54,040 Speaker 2: And here in particular two things that in some ways 226 00:11:54,200 --> 00:11:54,960 Speaker 2: they are not bad. 227 00:11:55,000 --> 00:11:57,920 Speaker 3: It's not a speculation, it's actually what you use a 228 00:11:58,000 --> 00:12:01,720 Speaker 3: financial market for. But it have really exacerbated the valley. 229 00:12:01,880 --> 00:12:03,920 Speaker 3: So we need to look at how the market work. 230 00:12:03,960 --> 00:12:07,520 Speaker 3: Was basically one on one commoity markets just minding a 231 00:12:07,559 --> 00:12:11,400 Speaker 3: commoity trader which is getting Coco pins and therefore has 232 00:12:11,440 --> 00:12:14,360 Speaker 3: a long position on the physical side of the Coco 233 00:12:14,800 --> 00:12:18,520 Speaker 3: and therefore wants to ensure against price variation. It wants 234 00:12:18,520 --> 00:12:21,480 Speaker 3: to h so it will take the opposite position on 235 00:12:21,520 --> 00:12:22,480 Speaker 3: the financial market. 236 00:12:22,520 --> 00:12:25,960 Speaker 2: It will go short. All fine, the price of Coco 237 00:12:26,040 --> 00:12:26,559 Speaker 2: goes up. 238 00:12:26,960 --> 00:12:29,560 Speaker 3: Is losing money on the futures market because he's short, 239 00:12:29,720 --> 00:12:31,680 Speaker 3: but he's making money on the financial and on the 240 00:12:31,679 --> 00:12:34,959 Speaker 3: physical side because it's long physical. So one another off 241 00:12:35,040 --> 00:12:37,920 Speaker 3: sets all here, no problem. That's exactly why you use 242 00:12:37,960 --> 00:12:41,640 Speaker 3: the market. Obviously, you need to sustain that short position 243 00:12:41,679 --> 00:12:45,160 Speaker 3: on the financial market, and for that, from time to time, 244 00:12:45,240 --> 00:12:48,080 Speaker 3: as you are losing money on that position, they change. 245 00:12:48,120 --> 00:12:50,920 Speaker 3: The brokers are going to be the mandy margin variation 246 00:12:51,120 --> 00:12:54,640 Speaker 3: margin and Obviously, when the market goes to those insane 247 00:12:54,800 --> 00:12:58,680 Speaker 3: levels of ten thousand dollars, which is double the previous record, 248 00:12:59,080 --> 00:13:04,040 Speaker 3: the margin calls are just staggering, and companies that otherwise 249 00:13:04,120 --> 00:13:07,400 Speaker 3: will just keep going, they have no option. They run 250 00:13:07,440 --> 00:13:09,480 Speaker 3: out of money for marketing calls, and they have to 251 00:13:09,480 --> 00:13:12,560 Speaker 3: buy back their hedges, and they buy back those hedges 252 00:13:12,640 --> 00:13:14,079 Speaker 3: at the worst potential moment. 253 00:13:14,120 --> 00:13:15,280 Speaker 2: This is a record high. 254 00:13:15,960 --> 00:13:18,880 Speaker 3: That's what's happening now, and that's why prices have just 255 00:13:19,120 --> 00:13:22,319 Speaker 3: really balloon. I mean, we have seen days the market 256 00:13:22,400 --> 00:13:27,000 Speaker 3: moving six seven hundred dollars. That's the typical price range 257 00:13:27,240 --> 00:13:29,920 Speaker 3: that in the past will take one or two years 258 00:13:30,080 --> 00:13:33,400 Speaker 3: to see, and here it happened just literally in eight 259 00:13:33,440 --> 00:13:36,680 Speaker 3: hours of marketing trading. That's how bad it has been. 260 00:13:37,120 --> 00:13:40,520 Speaker 3: There are also a number of participants that they seem 261 00:13:40,559 --> 00:13:43,360 Speaker 3: to be overhatched. They thought that they were going to 262 00:13:43,440 --> 00:13:46,760 Speaker 3: get an x amount of beans, say one hundred bins, 263 00:13:47,000 --> 00:13:50,240 Speaker 3: so they sold one hundred bins on the futures market. 264 00:13:50,640 --> 00:13:53,800 Speaker 3: But because the crops have been so low, everyone on 265 00:13:53,840 --> 00:13:57,199 Speaker 3: the physical side, the farmers are defaulting on the contracts, 266 00:13:57,440 --> 00:14:01,720 Speaker 3: and so some traders processor I'm finding that they are 267 00:14:01,800 --> 00:14:05,439 Speaker 3: getting only say twenty beans, but they have one hundred 268 00:14:05,480 --> 00:14:09,160 Speaker 3: being short position on the financial market, they are massively overheads. 269 00:14:09,320 --> 00:14:12,800 Speaker 3: They are needed to buy back those overheading positions or 270 00:14:12,880 --> 00:14:16,680 Speaker 3: rolling them over and that is just costing a lot 271 00:14:16,720 --> 00:14:19,720 Speaker 3: of money to everyone. And that's also at the end 272 00:14:19,720 --> 00:14:22,440 Speaker 3: of the day, pushing up prices, and it's used a loop. 273 00:14:22,760 --> 00:14:24,680 Speaker 3: The more they buy, the more it goes up, the 274 00:14:24,680 --> 00:14:26,880 Speaker 3: more marketing calls, and it's a circle. 275 00:14:26,920 --> 00:14:28,160 Speaker 2: We have been here before. 276 00:14:28,360 --> 00:14:31,480 Speaker 3: We were hearing in nickel, we were hearing natural gas, 277 00:14:31,560 --> 00:14:34,000 Speaker 3: we were hearing in cotton in two thousand and eight, 278 00:14:34,000 --> 00:14:35,360 Speaker 3: twenty eleven, and. 279 00:14:35,320 --> 00:14:38,280 Speaker 2: We know how this goes. The market will go up 280 00:14:38,400 --> 00:14:40,160 Speaker 2: until something breaks, right. 281 00:14:40,280 --> 00:14:43,720 Speaker 4: Yeah, definitely your description there, which was excellent, reminded me 282 00:14:44,000 --> 00:14:46,160 Speaker 4: of the nickel I guess that was in twenty twenty 283 00:14:46,200 --> 00:14:48,720 Speaker 4: one and those contracts that had to be broken. Who 284 00:14:48,760 --> 00:14:52,640 Speaker 4: participates in these markets? The big chocolate companies, how much 285 00:14:52,680 --> 00:14:56,800 Speaker 4: do they play in the futures market or versus like, 286 00:14:56,880 --> 00:15:00,280 Speaker 4: how much do they have direct relationships with farmers or 287 00:15:00,320 --> 00:15:04,480 Speaker 4: distributors that allow them to avoid some of these price swings. 288 00:15:05,000 --> 00:15:08,000 Speaker 2: There is a bit of everything. I mean, big players. 289 00:15:08,080 --> 00:15:12,120 Speaker 3: We have the big Commoiti traders in Coco like cargill 290 00:15:12,680 --> 00:15:16,240 Speaker 3: or Lamb of Singapore, Barry Khalabud, which is a trader 291 00:15:16,280 --> 00:15:19,960 Speaker 3: and a processor. And then we have specialty commoity traders 292 00:15:20,000 --> 00:15:23,320 Speaker 3: in coco, the likes of e Com, micro Industrial, the 293 00:15:23,480 --> 00:15:27,720 Speaker 3: likes of two Ton Suck then and a few others. 294 00:15:27,920 --> 00:15:32,280 Speaker 3: We have obviously the chocolate companies, the Nestless, the hairshet 295 00:15:32,320 --> 00:15:35,400 Speaker 3: of this world. That they all participate buying, selling on 296 00:15:35,440 --> 00:15:38,120 Speaker 3: the physical side and also on the financial side as 297 00:15:38,160 --> 00:15:41,960 Speaker 3: a hedge, not to speculate, but but to hetche their positions. 298 00:15:42,120 --> 00:15:44,840 Speaker 3: So it is a very active market with all kinds 299 00:15:44,880 --> 00:15:48,600 Speaker 3: of different participants. And it's also no participants that you 300 00:15:48,680 --> 00:15:51,600 Speaker 3: just use h coco pans, which is the first kind 301 00:15:51,600 --> 00:15:54,560 Speaker 3: of element the feedstock of the industry, but there are 302 00:15:54,600 --> 00:15:59,680 Speaker 3: some semi process coco products that they need also to hatch. 303 00:15:59,760 --> 00:16:02,560 Speaker 3: I mean, you get coco liquor, which is the kind 304 00:16:02,560 --> 00:16:06,280 Speaker 3: of the really flavory stat when you press the cocoa 305 00:16:06,320 --> 00:16:08,840 Speaker 3: beans that you get, you get cocoa butter, you get 306 00:16:08,880 --> 00:16:12,680 Speaker 3: coco powder, and those kinds of cocoa products that they 307 00:16:12,760 --> 00:16:16,400 Speaker 3: go into the products that we then buy on the supermarket. 308 00:16:16,480 --> 00:16:19,520 Speaker 3: And to go back to what Tracy was, asking earlier, 309 00:16:19,600 --> 00:16:22,160 Speaker 3: you know how much of this cocoa price valy then 310 00:16:22,200 --> 00:16:24,840 Speaker 3: you just feed into the shelf of the supermarket. It 311 00:16:24,960 --> 00:16:26,920 Speaker 3: very much depends on what you are buying. If you 312 00:16:26,960 --> 00:16:30,320 Speaker 3: are buying like a high end chocolate box, the kind 313 00:16:30,360 --> 00:16:32,440 Speaker 3: of thing that you may use not even go to 314 00:16:32,480 --> 00:16:36,800 Speaker 3: the supermarket, but one of these boutique chocolate boutiques chocolate hotels, 315 00:16:36,960 --> 00:16:39,480 Speaker 3: well you know there is a lot of marketing there. 316 00:16:39,520 --> 00:16:42,200 Speaker 3: You are paying probably more for the box and the 317 00:16:42,280 --> 00:16:45,240 Speaker 3: actual card box or even budden box or metal box 318 00:16:45,440 --> 00:16:47,400 Speaker 3: that you are buying, the kind of the service, the 319 00:16:47,520 --> 00:16:50,440 Speaker 3: kind of glamour, or buying it in a very fancy 320 00:16:50,520 --> 00:16:54,440 Speaker 3: location on a highest street, or that's more important that 321 00:16:54,840 --> 00:16:57,160 Speaker 3: the coco. If you go to the supermarket and you 322 00:16:57,200 --> 00:17:00,040 Speaker 3: are buying just a regular tread might kind of you know, 323 00:17:00,440 --> 00:17:03,000 Speaker 3: a small bar. The kind of things that I feed 324 00:17:03,080 --> 00:17:05,119 Speaker 3: while I'm working at the Bloomberg news room, I go 325 00:17:05,240 --> 00:17:08,080 Speaker 3: upstairs into the pantry and get some chocolate bars and 326 00:17:08,080 --> 00:17:09,880 Speaker 3: then I can just put a few more hours into 327 00:17:09,880 --> 00:17:13,919 Speaker 3: my desk. Those are really more affected by by cocoa 328 00:17:13,920 --> 00:17:15,919 Speaker 3: prices because the market is a lot smaller. 329 00:17:17,400 --> 00:17:19,320 Speaker 1: So my takeaway from this is that I need to 330 00:17:19,359 --> 00:17:21,840 Speaker 1: start stockpiling more expensive chocolate. 331 00:17:25,119 --> 00:17:27,600 Speaker 3: You should have done this like two months ago when 332 00:17:27,600 --> 00:17:30,119 Speaker 3: I wrote first about this. I mean, I have no 333 00:17:30,240 --> 00:17:32,040 Speaker 3: I'm not gonna tell you what is on my kitchen. 334 00:17:32,480 --> 00:17:33,119 Speaker 3: That's a secret. 335 00:17:33,200 --> 00:17:35,200 Speaker 1: Can you do your favorite Can you just send me an 336 00:17:35,200 --> 00:17:38,240 Speaker 1: email right before you write your columns and just let 337 00:17:38,240 --> 00:17:41,000 Speaker 1: me know what the modern I should be stockpile. 338 00:17:41,000 --> 00:17:46,000 Speaker 2: That inside training. We cannot do this perfect. 339 00:17:45,760 --> 00:17:48,600 Speaker 1: Okay, even for chocolate. That seems that seems strict. 340 00:17:48,760 --> 00:17:50,840 Speaker 2: Okay, I think I think that is no, no, no, no. 341 00:17:51,000 --> 00:17:54,760 Speaker 3: I remember very well the statute and on the CFTC 342 00:17:55,160 --> 00:17:58,600 Speaker 3: it really clearly say that you cannot use inside information 343 00:17:59,000 --> 00:18:02,880 Speaker 3: on the exception, with the exception of the chocolate market, 344 00:18:03,440 --> 00:18:05,639 Speaker 3: is there, I mean, just check with the CDC chairman 345 00:18:05,880 --> 00:18:07,120 Speaker 3: will confirm few. 346 00:18:07,240 --> 00:18:07,560 Speaker 2: Okay. 347 00:18:07,840 --> 00:18:10,200 Speaker 1: On a serious note, though it sounds so I take 348 00:18:10,200 --> 00:18:12,920 Speaker 1: the point about what's gonna arrest the sort of short 349 00:18:13,000 --> 00:18:16,639 Speaker 1: term cycle is something breaking in the financial market, But 350 00:18:16,680 --> 00:18:20,760 Speaker 1: what arrests the long term dynamic of a mismatch between 351 00:18:20,920 --> 00:18:23,800 Speaker 1: supply and demand, because as you mentioned, it doesn't seem 352 00:18:23,840 --> 00:18:27,240 Speaker 1: like there's a lot of appetite out there for further investment, 353 00:18:27,359 --> 00:18:28,879 Speaker 1: which is really what's needed. 354 00:18:29,520 --> 00:18:31,879 Speaker 3: Well, First of all, you know, these markets are a 355 00:18:32,000 --> 00:18:33,840 Speaker 3: cyclical and weather is a big pattern. 356 00:18:33,960 --> 00:18:36,320 Speaker 2: If we get a couple of years, three years in. 357 00:18:36,280 --> 00:18:40,000 Speaker 3: A row of decent, good weather, that could really resolve 358 00:18:40,119 --> 00:18:42,119 Speaker 3: a lot of the problem. And demand is going to 359 00:18:42,200 --> 00:18:43,760 Speaker 3: do a lot of work. I mean, we are going 360 00:18:43,840 --> 00:18:46,800 Speaker 3: to see really a biggest lowdown in demand. It's not 361 00:18:46,840 --> 00:18:48,920 Speaker 3: just gonna be because we are going to be priced out. 362 00:18:49,200 --> 00:18:53,960 Speaker 3: It's gonna be unfortunately. We're gonna finds reflac its reflexion 363 00:18:54,359 --> 00:18:58,600 Speaker 3: juice all over the boxes. Rather than having ten pieces 364 00:18:58,600 --> 00:19:01,560 Speaker 3: of chocolate, they are gonna have a the tablerons are 365 00:19:01,560 --> 00:19:03,879 Speaker 3: gonna be thinner at the top. I mean, all of 366 00:19:03,920 --> 00:19:06,159 Speaker 3: these things that the quality of the coco probably is 367 00:19:06,200 --> 00:19:09,080 Speaker 3: gonna come down. There's gonna be more hassle notes on 368 00:19:09,119 --> 00:19:12,040 Speaker 3: the coco mix, my nutella maybe just be a bit 369 00:19:12,160 --> 00:19:14,399 Speaker 3: lighter on coco. All of those things are gonna be 370 00:19:14,440 --> 00:19:16,960 Speaker 3: at play, and that's gonna rebalance the market. But yeah, 371 00:19:17,040 --> 00:19:20,400 Speaker 3: I mean weather, it's gonna be really really important. And 372 00:19:20,440 --> 00:19:23,040 Speaker 3: then there are a number of countries where farmers right 373 00:19:23,080 --> 00:19:26,960 Speaker 3: now are getting market price Ecuador, Brazil, Indonesia. 374 00:19:27,040 --> 00:19:27,720 Speaker 2: And if you are a. 375 00:19:27,680 --> 00:19:30,600 Speaker 3: Farmer, a coco farmer, in those three countries. You are 376 00:19:30,640 --> 00:19:33,360 Speaker 3: gonna try to produce as must as you can. You're 377 00:19:33,359 --> 00:19:36,520 Speaker 3: gonna fertilize, You're gonna take care of the coco trees 378 00:19:37,080 --> 00:19:39,800 Speaker 3: as almost they were your children, because you don't want 379 00:19:39,800 --> 00:19:42,879 Speaker 3: any diseases, you don't want anything happening to them. And 380 00:19:42,920 --> 00:19:44,960 Speaker 3: then next year we get good weather, we get a 381 00:19:45,000 --> 00:19:47,040 Speaker 3: good crop, and the market really comes down. 382 00:19:47,119 --> 00:19:48,879 Speaker 4: What is it, just last question for me, what is 383 00:19:48,920 --> 00:19:53,720 Speaker 4: it structurally about Ecuador, Indonesia and elsewhere that allows those 384 00:19:53,720 --> 00:19:55,560 Speaker 4: farmers to get a market price in the way the 385 00:19:55,560 --> 00:19:56,600 Speaker 4: West African. 386 00:19:56,440 --> 00:20:01,520 Speaker 3: Facts mostly the structure of taxi, the structure of the 387 00:20:01,600 --> 00:20:05,360 Speaker 3: market in places like Coco. Sorry, in places like Ivory 388 00:20:05,400 --> 00:20:08,399 Speaker 3: Coast and Ghana, the government effectively is buying from the 389 00:20:08,400 --> 00:20:11,560 Speaker 3: farmers at a fixed price, so the farmers know in 390 00:20:11,600 --> 00:20:13,399 Speaker 3: advance this is the price that the government is going 391 00:20:13,440 --> 00:20:15,680 Speaker 3: to pay, so they don't suffer the ups and downs 392 00:20:15,720 --> 00:20:18,600 Speaker 3: of the market. Is good when the market goes down, obviously, 393 00:20:18,600 --> 00:20:21,119 Speaker 3: it's not great when the market goes up like now. 394 00:20:21,480 --> 00:20:23,800 Speaker 2: But for those countries, coco is so. 395 00:20:23,760 --> 00:20:27,320 Speaker 3: Important for the economy that the governments are deeply regulating 396 00:20:27,320 --> 00:20:30,480 Speaker 3: and deeply controlling the market. In some cases, you talk 397 00:20:30,560 --> 00:20:32,560 Speaker 3: to people in the market, will say it's a lot 398 00:20:32,560 --> 00:20:37,640 Speaker 3: of corruption within those governments. In places like Ecuador, Indonesia, Brazil, 399 00:20:37,960 --> 00:20:41,679 Speaker 3: Coco is another commodity. It's not important for the national economy, 400 00:20:41,880 --> 00:20:42,880 Speaker 3: so the governments are. 401 00:20:42,760 --> 00:20:44,200 Speaker 2: Not that involved. 402 00:20:44,400 --> 00:20:47,520 Speaker 3: Prices are free, whatever the market says. When it's price 403 00:20:47,600 --> 00:20:49,720 Speaker 3: is low, the farmers are not happy. But when the 404 00:20:49,760 --> 00:20:52,600 Speaker 3: prices are very high, the farmers are celebrating. Like now 405 00:20:52,640 --> 00:21:07,679 Speaker 3: that that's the big difference. I'm looking forward for that 406 00:21:08,000 --> 00:21:09,720 Speaker 3: coco plantation business that. 407 00:21:09,680 --> 00:21:10,200 Speaker 2: Will be. 408 00:21:12,440 --> 00:21:14,119 Speaker 1: You'll see. 409 00:21:14,200 --> 00:21:19,000 Speaker 3: That's why I have an old and I have been 410 00:21:19,040 --> 00:21:21,119 Speaker 3: there for two years. He has produced not a single 411 00:21:21,440 --> 00:21:25,560 Speaker 3: in olive, but it's beautiful there and I'm I'm still 412 00:21:25,640 --> 00:21:28,280 Speaker 3: hoping that three to five ys from now we will 413 00:21:28,320 --> 00:21:29,960 Speaker 3: get about six olives. 414 00:21:30,000 --> 00:21:33,560 Speaker 1: Well, so I hear like the London environment is supposed 415 00:21:33,560 --> 00:21:35,879 Speaker 1: to be turning more Mediterranean, right, so maybe you just 416 00:21:35,880 --> 00:21:36,960 Speaker 1: need to wait for more climate. 417 00:21:37,040 --> 00:21:39,880 Speaker 2: That's that's probably it is my head against. 418 00:21:39,800 --> 00:21:41,120 Speaker 1: Yeah, exactly, exactly. 419 00:21:45,720 --> 00:21:48,840 Speaker 4: Lots more is produced by Carmen Rodriguez and dash Ol Bennett, 420 00:21:48,840 --> 00:21:51,040 Speaker 4: with help from Moses on Them and kel Brooks. 421 00:21:51,400 --> 00:21:54,560 Speaker 1: Our sound engineer is Blake Maple's Sage Bauman is the 422 00:21:54,600 --> 00:21:56,199 Speaker 1: head of Bloomberg Podcasts. 423 00:21:56,640 --> 00:21:59,920 Speaker 4: Please rate, review, and subscribe to Odd, Lots and Lots 424 00:22:00,119 --> 00:22:03,120 Speaker 4: More on your favorite podcast platforms, And. 425 00:22:03,200 --> 00:22:06,320 Speaker 1: Remember that Bloomberg subscribers can listen to all our podcasts 426 00:22:06,400 --> 00:22:10,359 Speaker 1: ad free by connecting through Apple Podcasts. Thanks for listening.