INTERNATIONAL COCOA AGREEMENT BILL (Hansard, 23 July 1973)

§ LORD HOY

My Lords, I want to raise one specific question on this Bill because, while it has had the complete agreement of the whole House, in the course of its proceedings certain things have happened with regard to cocoa and I am sure your Lordships will want some assurance from the Minister. We are all agreed on the purpose of this Bill, which is in fact to give a reasonable standard of living to those who produce cocoa and at the same time to sell at prices which are reasonable to the consumer. But while we all agree on this, in between the various stages we were faced with a new situation in the City, where apparently people gambled to a large extent on this commodity. I am sure your Lordships would not like to think that the purpose of this Bill might in fact be defeated because of these particular deals which resulted in losses amounting to no less than £20 million. I am certain that the larger firm concerned will want to take steps to see that they are not landed in that mess again, but what I should like to have from the noble Earl, Lord Ferrers, is an assurance that this sort of thing will not be allowed to interfere with the purpose of this Bill, which has met with the unanimous agreement of your Lordships' House.

EARL FERRERS

My Lords, I think I can give the noble Lord the assurance that he requires in regard to this matter. The purpose of this Bill is to try to help to put a degree of reasonableness into the bottom of the cocoa market and in so doing to enable developing countries to try to increase their production in line with the increasing demands of cocoa. Of course the noble Lord, Lord Hoy, is quite right in saying that there have been two particular matters which have been of great concern in regard to cocoa. I think it would be wrong to suggest that these particular dealings have an effect upon the Bill which is before your Lordships at the moment.

The conduct of the terminal market in cocoa is the responsibility of the London Cocoa Terminal Market Association, who have regulated its operations successfully for many years. The Association is not, of course, responsible for the trading policy of the two companies recently in- 1516 volved in losses, and these losses have been borne entirely by the two companies themselves. The International Commodities Clearing House Limited, which operates within rules agreed with the Association, took steps some weeks ago to deal with the exceptional market situation resulting from the current world use of cocoa. This action took the form of doubling the deposits required. In addition, in the light of recent events, the Association is keeping a close watch on the operation of the market. The noble Lord, Lord Hoy, said there was speculation as a result of this. It is true that there has been, and always is, some element of speculation in commodity markets. I suggest to the noble Lord that they could not manage effectively without it. But it is important that the speculation should not get out of hand, and to this end the Bank of England keeps a close watch on all major commodity markets. I assure the noble Lord there is no evidence that the cocoa market itself has been disturbed or distorted by speculation.

My Lords, the major factor in the cocoa market to-day is the relative shortage of cocoa, with production in the current year estimated to be a record of 200,000 tons, or some 13½ per cent. below the estimated demand. The companies that have been involved in this particular transaction have themselves been responsible for the losses, and this has not upset the cocoa market itself. I hope that the House will approve this Bill, which is a distinct effort and a distinct move forward which has taken some 15 years to come to fruition, in order to try and put some form of regulation and bottom into an otherwise oscillating market.