ECOM buys Euromar to guard against cocoa price volatility, says commodity insider

28-Mar-2017 - Last updated on 29-Mar-2017 at 07:36 GMT

Swiss commodities firm ECOM agreed to buy German cocoa processor Euromar earlier this month . Photo: ©iStock/eefauscan

ECOM's proposed deal to acquire German cocoa grinder Euromar will help protect it from cocoa price fluctuations, says a commodities consultant.

German cocoa processor Euromar filed for bankruptcy and suspended operations in August 2016 after taking a position on the London futures market that proved costly when the pound weakened after the UK’s Brexit vote.

Its parent company, the Transmar group - which supplies firms such as Nestlé, Hershey and Mars - later filed its US subsidiary, Transmar Commodity, for bankruptcy in January,

Swiss commodity merchant ECOM agreed to buy Euromar Commodities GmbH earlier this month, according to Reuters.

Jordan Lewis, director at consultancy firm Redstone Commodity Search, said ECOM's deal could help it avoid cocoa price fluctuations.

“Bringing more production capability in house has been a strategy that is becoming more commonplace within the market recently,” Lewis told ConfectioneryNews.

“We have seen this across many of our clients as they look to reduce the risk of the buy-side production woes and price compression in the soft commodity space over the last few years.”

ECOM's Euromar deal is the result of “the continued risk adversity of many trading companies who are seeing a move away from the traditional back-to-back trading strategy to a more fundamental physical production business mode,” said Lewis.

Both Euromar’s executive assistant Ilka Nuemaan and ECOM declined to comment on the deal.

Brexit’s impact on Euromar

Insolvency administrator Rolf Rattunde recently told Reuters that he was confident that German cartel authorities will approve ECOM’s purchase of the factory Euromar.

Transmar’s chief restructuring officer, Robert Frezza, previously said Brexit, which caused currency fluctuations, had “significant negative impact on the liquidity of Euromar.”

“Euromar’s insolvency has also substantially added to the debtor’s (Transmar) own financial distress.”

ECOM plans to resume production at Euromar’s plant at Fehrbellin near Berlin, Rattunde reportedly said. So far, a sale contract for Euromar’s facility and equipment has been signed with ECOM and approved by Euromar’s interim committee of creditors.