Pierre Andurand Says the World Could Run Out of Cocoa Inventories

SPEAKER_1 (0:03)

Bloomberg Audio Studios, podcasts, radio, news.

Tracy Alloway (0:20)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:24)

And I'm Joe Weisenthal.

Tracy Alloway (0:26)

Joe, can I tell you something? It's slightly embarrassing.

Joe Weisenthal (0:30)

This could be of many things, but yes, go on.

Tracy Alloway (0:33)

Okay, so I had a self-realization the other day. I think I might have prepper tendencies.

Joe Weisenthal (0:39)

I didn't know that, but that doesn't totally surprise. Like, it sort of fits.

Tracy Alloway (0:45)

You're like, yes, you're paranoid. This makes total sense.

Joe Weisenthal (0:48)

I kind of get that.

Tracy Alloway (0:49)

So, the reason I had this realization, we recorded an episode recently on the big surge in cocoa prices, and a few days after that episode came out, I was like, hmm, I should buy some chocolate, just in case. So, I went on Amazon, and I bought, like, an industrial-size package of Milka chocolate, and I was like, I'll just keep it in the pantry. It'll be really convenient. It'll be there for emergencies. I'm sure I won't eat it at, like, 10 p.m. when I'm craving something sweet. I'll just keep it there for a long time.

And so I ordered it, and then you know what happened?

Joe Weisenthal (1:24)

Tell me the rest.

Tracy Alloway (1:25)

Okay, so the first thing that happened was I never got the chocolate, which is kind of weird for Amazon. Like, they just never fulfilled the order, and the supplier was like, oops, we don't have enough chocolate, I guess. But then secondly, as soon as I did it, prices of cocoa started falling.

Joe Weisenthal (1:41)

This was the market saving you from a bad trade, basically. So you put in an order right at the top. You know, sometimes you need a little luck in life, and now you can buy the dip.

Tracy Alloway (1:51)

That's right. I was fully refunded at the top of the market, and now I can buy when it's slightly more reasonable. But I have to say, I'm looking at the chart of Cocoa Futures right now. So they surged above 11,000, and then they came back down, let's see, we're about 8,000 right now. So it's been something of a roller coaster ride.

And the thing that I don't really understand is, when I look at coverage of the cocoa market at the moment, there seems to be consensus that supply is going to be an issue. So I know Bloomberg published a survey of traders where basically everyone was saying that they think prices are gonna go higher. We could see over $15,000 later this year, but in the meantime, prices are sliding. So there seems to be a disconnect there.

Joe Weisenthal (2:39)

Totally. Well, look, I mean, even if the fundamentals are say, okay, this market is in deficit or all these growing conditions, like at some point, as they say, trees don't grow to the moon or trees don't grow to the sky, whatever it is. So at some point, like you can have like solid bullish fundamentals and the price, I mean, it really is crazy because last December, we were looking at 4,000.

So we're still double so far this year.

Tracy Alloway (3:04)

Yeah, well, I have to say, we do in fact have the perfect guest. We're gonna be speaking to someone who timed the big cocoa trade a lot better than I did personally in my pantry.

But we're gonna be speaking with Pierre Andurand. He is of course the founder of Andurand Capital Management. We're gonna talk cocoa and a bunch of other commodities. So Pierre, thank you so much for coming back on Odd Lots.

Pierre Andurand (3:27)

Hi, thanks very much.

Tracy Alloway (3:29)

So maybe to begin with, talk to us about how you got interested in cocoa because my understanding is you put a big trade on a long position earlier this year. It paid off massively, but this isn't a sort of normal type of trade for you. This is something that was a little bit different.

Pierre Andurand (3:48)

Yes, well, generally my background is more in energy trading, but I've traded quite a bit of metals as well, a little bit of agricultural products. But I have one analyst who was very good and who told me in January, Pierre, you should look at cocoa. So I'm like, okay, I don't know anything about it. Tell me about it. And he gave me a really good presentation that was really interesting. So then we really digged in really deep together to really understand the fundamentals of the market. And basically we have a massive supply shortage this year. I mean, we see production down 17% relative to last year.