Michael Giberson
…yes: cocoa market manipulation says Craig Pirrong. He comes to that conclusion after his examination of price movements in cocoa markets revealed all the fingerprints of a classic squeeze.
In brief, Pirrong compared July London cocoa prices against September and November London prices and July New York prices over a period from January 2000 to June 2010. Anomalous moves in the July London price relative to these related markets suggest manipulation. When Pirrong’s analysis is combined with one large trader seeking delivery on an unusually large percentage of July London contracts the case is more or less obvious.
Pirrong refers to his 2004 American Law and Economics Review article on the Ferruzzi soybean market episode for background on commodity market manipulation and its detection. For a more generally accessible explanation see his discussion in his recent Energy Law Journal article, “Energy Market Manipulation: Definition, Diagnosis, and Deterrence.” (The directly relevant explanation is in Section VI of the paper, but if you are interested in market manipulation then the entire paper is worth reading.)
See also Pirrong’s related recent blog posts: “Chocolate Kisses” and “Get a Room.”