WEBVTT - Lots More on the Parabolic Surge in Cocoa Prices 0:00:03.120 --> 0:00:08.360 Bloomberg Audio Studios, podcasts, radio news. 0:00:10.400 --> 0:00:13.360 Hi have you, Hey, how are you guys? We're good? 0:00:13.480 --> 0:00:16.439 How are you? No bad? And no complain? 0:00:17.200 --> 0:00:20.479 You know, olive oil prices are high, chocolate prices are high. 0:00:20.520 --> 0:00:25.079 I mean you're in demand, maybe in demand, but certainly 0:00:25.120 --> 0:00:26.600 I'm just gonna be ruined this. 0:00:26.760 --> 0:00:30.440 Right, what's happening with all of oil prices? 0:00:30.920 --> 0:00:33.560 They have come down about ten percent. I mean we're 0:00:33.600 --> 0:00:36.440 at the peak of the crop has just arrived, so 0:00:36.479 --> 0:00:39.440 it's it's normal that the prices come down a bit 0:00:39.520 --> 0:00:41.720 and demand is starting to react. I mean, it just 0:00:41.800 --> 0:00:43.200 it's just bloody expensive. 0:00:43.400 --> 0:00:49.320 Hey, this is like Javier's personal CPI basket, rightil and coco. 0:00:49.680 --> 0:00:52.199 I mind the waiting of those two items on my 0:00:52.240 --> 0:00:55.760 personal CPI basket. It's just coco and olive oil, probably 0:00:55.840 --> 0:01:00.080 one hundred and forty percent of it. 0:01:00.240 --> 0:01:09.920 I did a deadlift one. 0:01:01.560 --> 0:01:07.320 Two uh barges. 0:01:07.440 --> 0:01:09.480 This isn't after school special, except. 0:01:09.240 --> 0:01:11.760 I've decided I'm going to base my entire personality going 0:01:11.800 --> 0:01:15.040 forward on campaigning for a strategic pork reserve in the US. 0:01:15.120 --> 0:01:16.840 Where's the best with Impasta? 0:01:17.040 --> 0:01:19.600 These are the important question. Is it robots taking over 0:01:19.640 --> 0:01:20.000 the world? 0:01:20.080 --> 0:01:22.920 No, I think that like, in a couple of years, 0:01:23.080 --> 0:01:25.399 the AI will do a really good job of making 0:01:25.400 --> 0:01:28.760 the odd Launch podcast, and people say, I don't really 0:01:28.760 --> 0:01:30.600 need to listen to Joe and Tracy anymore. 0:01:30.840 --> 0:01:31.720 We do have. 0:01:33.520 --> 0:01:37.120 Perfect welcome to lots more? Will we catch up with 0:01:37.160 --> 0:01:39.120 friends about what's going on right now? 0:01:39.520 --> 0:01:42.759 Because even when odd Loots is over, there's always lots 0:01:42.800 --> 0:01:43.840 more and. 0:01:43.840 --> 0:01:48.880 We really do have the perfect guest Tracy, do you 0:01:48.880 --> 0:01:51.000 have opinions on chocolate? Do you have a favorite chocolates? 0:01:51.080 --> 0:01:51.440 I don't know. 0:01:51.480 --> 0:01:53.920 I've never askedly, I've never heard you. Actually I have. 0:01:54.440 --> 0:01:58.560 I'm expecting a long list of exotic flavors and names. 0:01:58.760 --> 0:01:59.800 Are you ready for my ted? 0:02:00.360 --> 0:02:00.640 Yes? 0:02:00.840 --> 0:02:02.400 Well, you see, when people ask if you have a 0:02:02.440 --> 0:02:04.640 favorite chocolate, I feel like you have to divide that 0:02:04.720 --> 0:02:09.480 into different price baskets. Actually, so, my favorite cheap chocolate 0:02:09.600 --> 0:02:11.919 is actually, and this is controversial, I really like Hershey's. 0:02:12.080 --> 0:02:12.880 Oh interesting. 0:02:12.960 --> 0:02:16.200 I actually think like there is there's a cheap tasting 0:02:16.360 --> 0:02:20.000 chocolate that is actually wonderful and it tastes cheap but 0:02:20.080 --> 0:02:23.000 it's still great, and that's Hershey's. And then my mid 0:02:23.120 --> 0:02:26.360 range is probably milk Up, which I feel like I 0:02:26.400 --> 0:02:28.720 have to say as a half Austrian person, although that 0:02:28.760 --> 0:02:30.840 company is Swiss and I think it's produced out of 0:02:30.880 --> 0:02:34.040 Germany now. And then expensive chocolate. I like all of 0:02:34.080 --> 0:02:38.640 the Swiss ones. Basically, there's that Swiss chocolate store that's 0:02:38.800 --> 0:02:40.000 right under our office. 0:02:40.120 --> 0:02:41.040 Yeah, what's your view on that? 0:02:41.440 --> 0:02:44.000 It's really good? But oh my god. I went in 0:02:44.040 --> 0:02:46.919 there to buy a present for my husband for Valentine's 0:02:46.960 --> 0:02:50.520 Day and I grabbed like a little candy chocolate heart 0:02:50.600 --> 0:02:52.839 thing and I was like, oh, okay, I'll just I'll 0:02:53.200 --> 0:02:55.480 leave without looking at the price. How bad can it be? 0:02:55.560 --> 0:02:58.960 And I got to the register thirty seven dollars and 0:02:58.960 --> 0:03:00.959 that was in February. It's probably worse now. 0:03:01.240 --> 0:03:04.680 Yes, so as most people know. By now, cocoa prices 0:03:04.720 --> 0:03:07.639 have soored. And when there's a commodity soring. We talk 0:03:07.720 --> 0:03:11.160 with our colleague Javier Blast. Do you have a favorite chocolate? 0:03:12.320 --> 0:03:18.200 Ah, I grew up in a Spain basically with Nofelia, 0:03:18.320 --> 0:03:23.320 which is the Spanish kind of brand of nutella. And yes, yes, yes, 0:03:23.360 --> 0:03:25.040 I know that that's a lot of milk and sugar 0:03:25.080 --> 0:03:28.400 and haszle nuts. But I still I will buy a 0:03:28.520 --> 0:03:32.239 jar of you know, the Spanish nutella, and I will 0:03:32.280 --> 0:03:34.519 not do a spread over bread. I will just get 0:03:34.520 --> 0:03:37.000 a spoon, a bigger spoon, and then just eat it. 0:03:37.080 --> 0:03:41.160 I'm five minutes later, then nutella is over and I'm unhappy, 0:03:41.240 --> 0:03:44.520 and you know, within thirty seconds the guild will come. 0:03:44.600 --> 0:03:48.000 But for for about thirty seconds, I am the happiest 0:03:48.120 --> 0:03:49.280 guy in this planet. 0:03:49.680 --> 0:03:52.440 Eating nutella with a spoon is one of those underrated 0:03:52.960 --> 0:04:07.000 joys in life, I think. So we've seen this massive 0:04:07.080 --> 0:04:11.040 run up in recent weeks which has caused comparisons to 0:04:11.320 --> 0:04:15.600 in video of all things, So chocolate outperforming in video lately, 0:04:15.600 --> 0:04:17.880 which is kind of ridiculous because one of those things 0:04:17.920 --> 0:04:20.880 powers the collective brain power of the economy and the 0:04:20.920 --> 0:04:22.560 other thing is just semiconductors. 0:04:22.600 --> 0:04:25.720 So the one just helps, but mixed stuff up. 0:04:26.120 --> 0:04:28.760 That's right, Okay, So why don't we start really simply 0:04:28.839 --> 0:04:30.159 havevia what's going on here? 0:04:30.720 --> 0:04:34.320 Well, there are two things going on simultaneously. The rally 0:04:34.520 --> 0:04:39.560 started about a year ago completely unfundamentals. This was supply 0:04:39.640 --> 0:04:42.960 and demand. First of all, demand has been increasing every year. 0:04:43.040 --> 0:04:46.719 It goes with GDP, more middle class, more people like chocolate. 0:04:46.880 --> 0:04:49.479 Who is going to complain about that? So global chocolate 0:04:49.560 --> 0:04:52.640 consumption has more or less double over the last thirty years. 0:04:52.960 --> 0:04:56.680 Then the main problem was a series of crop failures 0:04:56.760 --> 0:05:00.400 in four countries in West Africa with account for roughly 0:05:00.480 --> 0:05:04.839 seventy five percent of the world's production. That's Ghana, Ivory Coasts, 0:05:04.920 --> 0:05:06.839 Cameroon and Nigeria. 0:05:07.160 --> 0:05:08.360 Crop failed there. 0:05:08.240 --> 0:05:11.520 For a number of factors, one being that prices have 0:05:11.560 --> 0:05:14.160 been low for many years. Farmers are poor, they don't 0:05:14.160 --> 0:05:16.799 have money to plant new trees, they don't have money 0:05:16.800 --> 0:05:19.839 for fertilizers, they don't have money for pesticide. 0:05:20.000 --> 0:05:21.680 So trees are all there. 0:05:21.720 --> 0:05:25.440 They produce less every year, and old trees are also 0:05:25.640 --> 0:05:30.520 more more vulnerable to chew issues, bad weather and diseases, 0:05:30.520 --> 0:05:33.159 and we got both of them over the last few months. 0:05:33.160 --> 0:05:36.480 The weather has been really bad in West Africa. I 0:05:36.520 --> 0:05:38.520 know that a lot of people talking about the drought. 0:05:38.640 --> 0:05:41.760 Note what really mattered was the rains. It rain a 0:05:41.800 --> 0:05:45.800 lot last year and just when we didn't need rains, 0:05:46.040 --> 0:05:51.960 and that really depressed the crop massively. And also at 0:05:51.960 --> 0:05:55.320 the same time we have had a disease spreading across 0:05:55.320 --> 0:05:57.880 Ghana and Ivory Coast that is called the swelling shoot. 0:05:58.440 --> 0:06:02.000 Is bad because once a tree gets it, you basically 0:06:02.040 --> 0:06:04.360 have to uproot the tree to get rid of it. 0:06:04.360 --> 0:06:07.320 It's really bad and that has been endemic in the area, 0:06:07.440 --> 0:06:11.080 but this season has really spread everywhere. That was the 0:06:11.080 --> 0:06:14.120 beginning of the rally and why we went from like 0:06:14.400 --> 0:06:18.720 two thousand, five hundred dollars to five thousand and six thousand, 0:06:19.080 --> 0:06:21.679 but we are now a ten thousand and more has happened. 0:06:22.560 --> 0:06:25.919 Is there any lever that can be pulled on the 0:06:25.960 --> 0:06:28.800 supply side, like in other commodities, it's like we're going 0:06:28.839 --> 0:06:32.120 to you know, draw some new wells or whatever it is. 0:06:32.120 --> 0:06:34.240 Is there anything that can be done on the supply 0:06:34.320 --> 0:06:35.880 side even in the medium term. 0:06:35.960 --> 0:06:37.240 Well, yes and no. 0:06:37.480 --> 0:06:40.960 I mean we're gonna have a reaction from farmers everywhere 0:06:40.960 --> 0:06:45.200 where they're actually getting market prices. That's particularly true in 0:06:45.279 --> 0:06:48.599 Latin America in Indonesia, and we're gonna see them bying 0:06:48.640 --> 0:06:51.960 fertilizer by investicized and next year it provided that the 0:06:52.000 --> 0:06:55.240 weather is better, productions would recover a lot and grow 0:06:55.279 --> 0:06:58.440 in those countries. But to grow production, the main prot 0:06:58.560 --> 0:07:01.719 is takes time. It takes five years since planting a 0:07:01.760 --> 0:07:04.440 new tree to get the first you know, decent crops 0:07:04.440 --> 0:07:08.440 from that tree, and that also requires money. But also 0:07:08.640 --> 0:07:13.000 importantly farmers in West Africa, particularly in Ivory Coast and Ghana, 0:07:13.000 --> 0:07:15.360 which you know they are the main producers, are not 0:07:15.440 --> 0:07:18.920 getting anywhere the market prices. I mean, i'd best they're 0:07:18.920 --> 0:07:22.360 getting twenty to thirty percent of the market price. So 0:07:22.400 --> 0:07:26.240 their incentive for planting more is just very limited. To 0:07:26.720 --> 0:07:28.120 say none, Wait have you? 0:07:28.280 --> 0:07:30.480 I need you to do something very important right now. 0:07:30.520 --> 0:07:33.239 I need you to walk me or talk me off 0:07:33.280 --> 0:07:36.240 the ledge of buying a cocoa plant and putting it 0:07:36.320 --> 0:07:38.840 in a greenhouse and trying to grow cocoa beans. Why 0:07:38.840 --> 0:07:41.360 why shouldn't I do this? You are It's kind of 0:07:41.360 --> 0:07:44.240 a New Years question though, why well, it's a greenhouse. 0:07:44.280 --> 0:07:45.240 But why isn't. 0:07:45.000 --> 0:07:48.960 There more commercial production of cocoa beans. Why haven't someone 0:07:48.960 --> 0:07:51.280 said like, oh, we can make tons of money by 0:07:51.320 --> 0:07:54.240 setting up some massive hydroponic farm or something. 0:07:54.600 --> 0:07:58.360 For two reasons. One, coco trees are not easy to cultivate. 0:07:58.840 --> 0:08:01.640 You need to basically have a very particular kind of 0:08:01.960 --> 0:08:06.440 climatic conditions that's roughly twenty degrees north and south of 0:08:06.480 --> 0:08:09.600 the equator. I think that you're going to struggle in 0:08:09.760 --> 0:08:12.520 New York even you use a glasshouse, or you're going 0:08:12.560 --> 0:08:16.400 to spend a lot of money heating on that class house, 0:08:16.400 --> 0:08:18.520 which is probably not good. 0:08:18.320 --> 0:08:21.040 For your wallet, neither for the environment. 0:08:21.080 --> 0:08:23.880 But you know, maybe we can convince someone at Bloomberg 0:08:23.920 --> 0:08:25.560 to let us just grow a coco tree on a 0:08:25.600 --> 0:08:26.640 glasshow in New York. 0:08:26.760 --> 0:08:28.720 That would be quite fun. But we need five. 0:08:28.520 --> 0:08:32.400 Years to get the first coco production and I have 0:08:32.480 --> 0:08:36.960 first dips or whatever you get. But why it's not commercial, 0:08:37.920 --> 0:08:40.280 that's a lot of the problem. I mean, on most 0:08:40.640 --> 0:08:44.720 agricultural commodities you have commercial plantations, you have plantation business. 0:08:44.960 --> 0:08:47.320 Here is all the small holders, and the reason is 0:08:47.320 --> 0:08:49.040 that no one really makes money on coco. 0:08:49.240 --> 0:08:50.400 I mean, the only reason. 0:08:50.120 --> 0:08:52.280 That we get a lot of coco is because it's 0:08:52.280 --> 0:08:55.640 the only kind of exit, the strategy for millions of 0:08:55.720 --> 0:08:58.880 poor farmers in West Africa to make some money. But 0:08:59.360 --> 0:09:02.960 it doesn't really develop into a commercial plantation business just 0:09:03.000 --> 0:09:06.680 because until now prices work so low that you know, 0:09:06.760 --> 0:09:08.920 it didn't make any commercial sense to make it. 0:09:09.520 --> 0:09:11.640 Who gets the money I think you mentioned you said 0:09:11.640 --> 0:09:14.080 the farmers. Maybe you're only getting twenty to thirty percent 0:09:14.160 --> 0:09:16.960 of the price of coco. Like how does it divide up? 0:09:17.000 --> 0:09:19.640 Sort of walk us through when cocoa is bought. When 0:09:19.720 --> 0:09:21.360 chocolate is bought, where the profits are. 0:09:21.280 --> 0:09:25.000 Accruing, Well, everyone makes money other than the farmers, let's 0:09:25.000 --> 0:09:28.440 put it that way. So the intermediary is make money. 0:09:29.280 --> 0:09:32.880 The governments make money in particularly in West Africa, because 0:09:33.040 --> 0:09:37.000 they tax coco very, very heavily. So governments are making money. 0:09:37.200 --> 0:09:40.680 Some of the commoity traders certainly they make money. The 0:09:40.800 --> 0:09:45.320 processes make money, and then you know, the chocolate companies, 0:09:45.320 --> 0:09:48.320 the confectionery companies also make money. They're going to make 0:09:48.320 --> 0:09:50.520 a bit less money because there is no way this 0:09:50.679 --> 0:09:52.760 year that they're going to be able to pass all 0:09:52.760 --> 0:09:55.840 the increase in coco cost to the consumers because their 0:09:55.880 --> 0:09:58.760 sales will really slamp, and I suppose that they're going 0:09:58.840 --> 0:10:02.760 to have to accept lower thinner margins in the next 0:10:02.800 --> 0:10:03.560 few months. 0:10:03.640 --> 0:10:06.480 But just as a rule of thumb. 0:10:06.240 --> 0:10:10.760 You basically say everyone makes money barring the farmers, and 0:10:11.160 --> 0:10:13.240 some of the governments in West Africa make a lot 0:10:13.280 --> 0:10:13.679 of money. 0:10:27.200 --> 0:10:28.960 So one of the things I wanted to ask you 0:10:29.200 --> 0:10:32.360 is we've seen a lot of headlines obviously about the 0:10:32.360 --> 0:10:36.320 price of chocolate. You know, cocoa breaking that ten thousand 0:10:36.320 --> 0:10:39.360 dollars barrier. You know, things are bad when people start 0:10:39.480 --> 0:10:42.760 using standard deviations. And I saw someone say that cocoa 0:10:42.840 --> 0:10:45.760 prices had risen one hundred and twenty five percent above 0:10:45.800 --> 0:10:49.440 their two hundred day moving average, ranking it as the 0:10:49.559 --> 0:10:52.960 seventh most profound deviation above the long term average for 0:10:53.040 --> 0:10:56.400 any commodity since nineteen fifty nine. So we have these 0:10:56.440 --> 0:10:59.480 insane numbers, insane stats. You can look at the charts 0:10:59.480 --> 0:11:03.120 and it's based straight upwards arrow, But how much of 0:11:03.160 --> 0:11:07.240 that feeds into the actual price that people are paying 0:11:07.320 --> 0:11:09.240 at the grocery store, Like how much of it is 0:11:09.280 --> 0:11:14.000 financialization and being squeezed upwards by things like margin calls. 0:11:14.000 --> 0:11:15.960 We know this is a commodity with a lot of 0:11:15.960 --> 0:11:18.559 speculation attached to it, So I guess I'm just curious, 0:11:18.600 --> 0:11:20.240 like how real is that number? 0:11:20.679 --> 0:11:24.079 Well, so two questions on you know, one is how 0:11:24.120 --> 0:11:26.480 much coco is on the chocolate that you actually buy 0:11:26.480 --> 0:11:29.200 on the supermarket and the and the other one is 0:11:29.240 --> 0:11:31.880 how much of the last few weeks of the rally 0:11:31.960 --> 0:11:34.920 is actually financial factors more than supply, as I said, 0:11:35.480 --> 0:11:37.600 More than supply and demand as I said at the beginning, 0:11:37.720 --> 0:11:39.880 supply and demand were really the main factors at the 0:11:39.920 --> 0:11:42.600 beginning of the rally. I will say that probably since 0:11:42.679 --> 0:11:47.559 kind of mid January early February, financial factors have really 0:11:47.600 --> 0:11:49.200 been a big driver. 0:11:49.760 --> 0:11:54.040 And here in particular two things that in some ways 0:11:54.200 --> 0:11:54.960 they are not bad. 0:11:55.000 --> 0:11:57.920 It's not a speculation, it's actually what you use a 0:11:58.000 --> 0:12:01.720 financial market for. But it have really exacerbated the valley. 0:12:01.880 --> 0:12:03.920 So we need to look at how the market work. 0:12:03.960 --> 0:12:07.520 Was basically one on one commoity markets just minding a 0:12:07.559 --> 0:12:11.400 commoity trader which is getting Coco pins and therefore has 0:12:11.440 --> 0:12:14.360 a long position on the physical side of the Coco 0:12:14.800 --> 0:12:18.520 and therefore wants to ensure against price variation. It wants 0:12:18.520 --> 0:12:21.480 to h so it will take the opposite position on 0:12:21.520 --> 0:12:22.480 the financial market. 0:12:22.520 --> 0:12:25.960 It will go short. All fine, the price of Coco 0:12:26.040 --> 0:12:26.559 goes up. 0:12:26.960 --> 0:12:29.560 Is losing money on the futures market because he's short, 0:12:29.720 --> 0:12:31.680 but he's making money on the financial and on the 0:12:31.679 --> 0:12:34.959 physical side because it's long physical. So one another off 0:12:35.040 --> 0:12:37.920 sets all here, no problem. That's exactly why you use 0:12:37.960 --> 0:12:41.640 the market. Obviously, you need to sustain that short position 0:12:41.679 --> 0:12:45.160 on the financial market, and for that, from time to time, 0:12:45.240 --> 0:12:48.080 as you are losing money on that position, they change. 0:12:48.120 --> 0:12:50.920 The brokers are going to be the mandy margin variation 0:12:51.120 --> 0:12:54.640 margin and Obviously, when the market goes to those insane 0:12:54.800 --> 0:12:58.680 levels of ten thousand dollars, which is double the previous record, 0:12:59.080 --> 0:13:04.040 the margin calls are just staggering, and companies that otherwise 0:13:04.120 --> 0:13:07.400 will just keep going, they have no option. They run 0:13:07.440 --> 0:13:09.480 out of money for marketing calls, and they have to 0:13:09.480 --> 0:13:12.560 buy back their hedges, and they buy back those hedges 0:13:12.640 --> 0:13:14.079 at the worst potential moment. 0:13:14.120 --> 0:13:15.280 This is a record high. 0:13:15.960 --> 0:13:18.880 That's what's happening now, and that's why prices have just 0:13:19.120 --> 0:13:22.319 really balloon. I mean, we have seen days the market 0:13:22.400 --> 0:13:27.000 moving six seven hundred dollars. That's the typical price range 0:13:27.240 --> 0:13:29.920 that in the past will take one or two years 0:13:30.080 --> 0:13:33.400 to see, and here it happened just literally in eight 0:13:33.440 --> 0:13:36.680 hours of marketing trading. That's how bad it has been. 0:13:37.120 --> 0:13:40.520 There are also a number of participants that they seem 0:13:40.559 --> 0:13:43.360 to be overhatched. They thought that they were going to 0:13:43.440 --> 0:13:46.760 get an x amount of beans, say one hundred bins, 0:13:47.000 --> 0:13:50.240 so they sold one hundred bins on the futures market. 0:13:50.640 --> 0:13:53.800 But because the crops have been so low, everyone on 0:13:53.840 --> 0:13:57.199 the physical side, the farmers are defaulting on the contracts, 0:13:57.440 --> 0:14:01.720 and so some traders processor I'm finding that they are 0:14:01.800 --> 0:14:05.439 getting only say twenty beans, but they have one hundred 0:14:05.480 --> 0:14:09.160 being short position on the financial market, they are massively overheads. 0:14:09.320 --> 0:14:12.800 They are needed to buy back those overheading positions or 0:14:12.880 --> 0:14:16.680 rolling them over and that is just costing a lot 0:14:16.720 --> 0:14:19.720 of money to everyone. And that's also at the end 0:14:19.720 --> 0:14:22.440 of the day, pushing up prices, and it's used a loop. 0:14:22.760 --> 0:14:24.680 The more they buy, the more it goes up, the 0:14:24.680 --> 0:14:26.880 more marketing calls, and it's a circle. 0:14:26.920 --> 0:14:28.160 We have been here before. 0:14:28.360 --> 0:14:31.480 We were hearing in nickel, we were hearing natural gas, 0:14:31.560 --> 0:14:34.000 we were hearing in cotton in two thousand and eight, 0:14:34.000 --> 0:14:35.360 twenty eleven, and. 0:14:35.320 --> 0:14:38.280 We know how this goes. The market will go up 0:14:38.400 --> 0:14:40.160 until something breaks, right. 0:14:40.280 --> 0:14:43.720 Yeah, definitely your description there, which was excellent, reminded me 0:14:44.000 --> 0:14:46.160 of the nickel I guess that was in twenty twenty 0:14:46.200 --> 0:14:48.720 one and those contracts that had to be broken. Who 0:14:48.760 --> 0:14:52.640 participates in these markets? The big chocolate companies, how much 0:14:52.680 --> 0:14:56.800 do they play in the futures market or versus like, 0:14:56.880 --> 0:15:00.280 how much do they have direct relationships with farmers or 0:15:00.320 --> 0:15:04.480 distributors that allow them to avoid some of these price swings. 0:15:05.000 --> 0:15:08.000 There is a bit of everything. I mean, big players. 0:15:08.080 --> 0:15:12.120 We have the big Commoiti traders in Coco like cargill 0:15:12.680 --> 0:15:16.240 or Lamb of Singapore, Barry Khalabud, which is a trader 0:15:16.280 --> 0:15:19.960 and a processor. And then we have specialty commoity traders 0:15:20.000 --> 0:15:23.320 in coco, the likes of e Com, micro Industrial, the 0:15:23.480 --> 0:15:27.720 likes of two Ton Suck then and a few others. 0:15:27.920 --> 0:15:32.280 We have obviously the chocolate companies, the Nestless, the hairshet 0:15:32.320 --> 0:15:35.400 of this world. That they all participate buying, selling on 0:15:35.440 --> 0:15:38.120 the physical side and also on the financial side as 0:15:38.160 --> 0:15:41.960 a hedge, not to speculate, but but to hetche their positions. 0:15:42.120 --> 0:15:44.840 So it is a very active market with all kinds 0:15:44.880 --> 0:15:48.600 of different participants. And it's also no participants that you 0:15:48.680 --> 0:15:51.600 just use h coco pans, which is the first kind 0:15:51.600 --> 0:15:54.560 of element the feedstock of the industry, but there are 0:15:54.600 --> 0:15:59.680 some semi process coco products that they need also to hatch. 0:15:59.760 --> 0:16:02.560 I mean, you get coco liquor, which is the kind 0:16:02.560 --> 0:16:06.280 of the really flavory stat when you press the cocoa 0:16:06.320 --> 0:16:08.840 beans that you get, you get cocoa butter, you get 0:16:08.880 --> 0:16:12.680 coco powder, and those kinds of cocoa products that they 0:16:12.760 --> 0:16:16.400 go into the products that we then buy on the supermarket. 0:16:16.480 --> 0:16:19.520 And to go back to what Tracy was, asking earlier, 0:16:19.600 --> 0:16:22.160 you know how much of this cocoa price valy then 0:16:22.200 --> 0:16:24.840 you just feed into the shelf of the supermarket. It 0:16:24.960 --> 0:16:26.920 very much depends on what you are buying. If you 0:16:26.960 --> 0:16:30.320 are buying like a high end chocolate box, the kind 0:16:30.360 --> 0:16:32.440 of thing that you may use not even go to 0:16:32.480 --> 0:16:36.800 the supermarket, but one of these boutique chocolate boutiques chocolate hotels, 0:16:36.960 --> 0:16:39.480 well you know there is a lot of marketing there. 0:16:39.520 --> 0:16:42.200 You are paying probably more for the box and the 0:16:42.280 --> 0:16:45.240 actual card box or even budden box or metal box 0:16:45.440 --> 0:16:47.400 that you are buying, the kind of the service, the 0:16:47.520 --> 0:16:50.440 kind of glamour, or buying it in a very fancy 0:16:50.520 --> 0:16:54.440 location on a highest street, or that's more important that 0:16:54.840 --> 0:16:57.160 the coco. If you go to the supermarket and you 0:16:57.200 --> 0:17:00.040 are buying just a regular tread might kind of you know, 0:17:00.440 --> 0:17:03.000 a small bar. The kind of things that I feed 0:17:03.080 --> 0:17:05.119 while I'm working at the Bloomberg news room, I go 0:17:05.240 --> 0:17:08.080 upstairs into the pantry and get some chocolate bars and 0:17:08.080 --> 0:17:09.880 then I can just put a few more hours into 0:17:09.880 --> 0:17:13.919 my desk. Those are really more affected by by cocoa 0:17:13.920 --> 0:17:15.919 prices because the market is a lot smaller. 0:17:17.400 --> 0:17:19.320 So my takeaway from this is that I need to 0:17:19.359 --> 0:17:21.840 start stockpiling more expensive chocolate. 0:17:25.119 --> 0:17:27.600 You should have done this like two months ago when 0:17:27.600 --> 0:17:30.119 I wrote first about this. I mean, I have no 0:17:30.240 --> 0:17:32.040 I'm not gonna tell you what is on my kitchen. 0:17:32.480 --> 0:17:33.119 That's a secret. 0:17:33.200 --> 0:17:35.200 Can you do your favorite Can you just send me an 0:17:35.200 --> 0:17:38.240 email right before you write your columns and just let 0:17:38.240 --> 0:17:41.000 me know what the modern I should be stockpile. 0:17:41.000 --> 0:17:46.000 That inside training. We cannot do this perfect. 0:17:45.760 --> 0:17:48.600 Okay, even for chocolate. That seems that seems strict. 0:17:48.760 --> 0:17:50.840 Okay, I think I think that is no, no, no, no. 0:17:51.000 --> 0:17:54.760 I remember very well the statute and on the CFTC 0:17:55.160 --> 0:17:58.600 it really clearly say that you cannot use inside information 0:17:59.000 --> 0:18:02.880 on the exception, with the exception of the chocolate market, 0:18:03.440 --> 0:18:05.639 is there, I mean, just check with the CDC chairman 0:18:05.880 --> 0:18:07.120 will confirm few. 0:18:07.240 --> 0:18:07.560 Okay. 0:18:07.840 --> 0:18:10.200 On a serious note, though it sounds so I take 0:18:10.200 --> 0:18:12.920 the point about what's gonna arrest the sort of short 0:18:13.000 --> 0:18:16.639 term cycle is something breaking in the financial market, But 0:18:16.680 --> 0:18:20.760 what arrests the long term dynamic of a mismatch between 0:18:20.920 --> 0:18:23.800 supply and demand, because as you mentioned, it doesn't seem 0:18:23.840 --> 0:18:27.240 like there's a lot of appetite out there for further investment, 0:18:27.359 --> 0:18:28.879 which is really what's needed. 0:18:29.520 --> 0:18:31.879 Well, First of all, you know, these markets are a 0:18:32.000 --> 0:18:33.840 cyclical and weather is a big pattern. 0:18:33.960 --> 0:18:36.320 If we get a couple of years, three years in. 0:18:36.280 --> 0:18:40.000 A row of decent, good weather, that could really resolve 0:18:40.119 --> 0:18:42.119 a lot of the problem. And demand is going to 0:18:42.200 --> 0:18:43.760 do a lot of work. I mean, we are going 0:18:43.840 --> 0:18:46.800 to see really a biggest lowdown in demand. It's not 0:18:46.840 --> 0:18:48.920 just gonna be because we are going to be priced out. 0:18:49.200 --> 0:18:53.960 It's gonna be unfortunately. We're gonna finds reflac its reflexion 0:18:54.359 --> 0:18:58.600 juice all over the boxes. Rather than having ten pieces 0:18:58.600 --> 0:19:01.560 of chocolate, they are gonna have a the tablerons are 0:19:01.560 --> 0:19:03.879 gonna be thinner at the top. I mean, all of 0:19:03.920 --> 0:19:06.159 these things that the quality of the coco probably is 0:19:06.200 --> 0:19:09.080 gonna come down. There's gonna be more hassle notes on 0:19:09.119 --> 0:19:12.040 the coco mix, my nutella maybe just be a bit 0:19:12.160 --> 0:19:14.399 lighter on coco. All of those things are gonna be 0:19:14.440 --> 0:19:16.960 at play, and that's gonna rebalance the market. But yeah, 0:19:17.040 --> 0:19:20.400 I mean weather, it's gonna be really really important. And 0:19:20.440 --> 0:19:23.040 then there are a number of countries where farmers right 0:19:23.080 --> 0:19:26.960 now are getting market price Ecuador, Brazil, Indonesia. 0:19:27.040 --> 0:19:27.720 And if you are a. 0:19:27.680 --> 0:19:30.600 Farmer, a coco farmer, in those three countries. You are 0:19:30.640 --> 0:19:33.360 gonna try to produce as must as you can. You're 0:19:33.359 --> 0:19:36.520 gonna fertilize, You're gonna take care of the coco trees 0:19:37.080 --> 0:19:39.800 as almost they were your children, because you don't want 0:19:39.800 --> 0:19:42.879 any diseases, you don't want anything happening to them. And 0:19:42.920 --> 0:19:44.960 then next year we get good weather, we get a 0:19:45.000 --> 0:19:47.040 good crop, and the market really comes down. 0:19:47.119 --> 0:19:48.879 What is it, just last question for me, what is 0:19:48.920 --> 0:19:53.720 it structurally about Ecuador, Indonesia and elsewhere that allows those 0:19:53.720 --> 0:19:55.560 farmers to get a market price in the way the 0:19:55.560 --> 0:19:56.600 West African. 0:19:56.440 --> 0:20:01.520 Facts mostly the structure of taxi, the structure of the 0:20:01.600 --> 0:20:05.360 market in places like Coco. Sorry, in places like Ivory 0:20:05.400 --> 0:20:08.399 Coast and Ghana, the government effectively is buying from the 0:20:08.400 --> 0:20:11.560 farmers at a fixed price, so the farmers know in 0:20:11.600 --> 0:20:13.399 advance this is the price that the government is going 0:20:13.440 --> 0:20:15.680 to pay, so they don't suffer the ups and downs 0:20:15.720 --> 0:20:18.600 of the market. Is good when the market goes down, obviously, 0:20:18.600 --> 0:20:21.119 it's not great when the market goes up like now. 0:20:21.480 --> 0:20:23.800 But for those countries, coco is so. 0:20:23.760 --> 0:20:27.320 Important for the economy that the governments are deeply regulating 0:20:27.320 --> 0:20:30.480 and deeply controlling the market. In some cases, you talk 0:20:30.560 --> 0:20:32.560 to people in the market, will say it's a lot 0:20:32.560 --> 0:20:37.640 of corruption within those governments. In places like Ecuador, Indonesia, Brazil, 0:20:37.960 --> 0:20:41.679 Coco is another commodity. It's not important for the national economy, 0:20:41.880 --> 0:20:42.880 so the governments are. 0:20:42.760 --> 0:20:44.200