COMMODITIES: Storm in a Cocoa Cup

Cried the New York Daily News: “It is comparable to the piratical prices the British-Dutch rubber cartels used to charge for their products. This stickup game is going on . . . at a time when we are . . . straining plenty of nerves, including financial ones, to keep Great Britain from going bankrupt.” What had caused the News to sound its A was the price of cocoa. Some U.S. chocolate manufacturers and traders on New York’s cocoa exchanges were just as mad.

The price rise in cocoa in recent weeks had outstripped every other commodity. Decontrolled by OPA at 14.95¢ a pound, December cocoa had soared to 35.45¢. Last week, after rising the legal limit each day for seven days, it got to 42.25¢. Spot deliveries were quoted at 49¢, a whopping 900% above 1939-3 price.

Sweet Tooth. The villain seemed indeed to be the British Government, which through its British Cocoa Control Board last year sold some 300,000 tons, about half the world output. It sets the pace for similar Government agencies in Brazil and the Dominican Republic. All three, by dint of shrewd timing in deliveries, have made fat profits in the U.S. market. But the British were not wholly responsible for the price rise.

Cocoa is parceled out in the world markets by the International Emergency Food Council. Although the U.S. got its full allocation of 258,000 tons, plus a “dividend” of about 10,000 tons, the quota was still far short of the 350,000 tons that U.S. chocolate manufacturers would like to buy. Contributing to the high price of cocoa were three other factors: competitive bidding for a scarce commodity, hoarding by large manufacturers, and a grave miscalculation by speculators.

Bitter End. The speculators had counted on an easing of the shortage Oct. 1, the beginning of the cocoa crop year. Looking for a price drop, they had sold cocoa short. But when no British and Brazilian cocoa was forthcoming, the speculators had to buy cocoa already in the U.S. This, some traders estimated, accounted for at least 10¢ in the price rise and it played straight into the hands of the British. They are expected to put the new crop on sale within the next two weeks and will probably get peak prices.

The chief victims of these shenanigans were some 4,000 small U.S. candy manufacturers, many of whom have already cut the size of their chocolate bars, or upped the sales price from 5¢ to 6¢. (The standard price for the “dollar” box of chocolates is now $1.25.) Unless the price of cocoa dropped, many would be forced to go out of business.