Trading firms that rely on cocoa derivatives could lose at least $1 billion and traders were forced to unwind short bets in a surging market because Ghana failed to produce beans this year.
This year, cocoa prices around the world surged as a result of lower production and availability of beans in Ghana, the world’s second-largest producer, due to weather-related issues, bean disease, smuggling, and illegal gold mining.
Due to the significant increase in cocoa prices, chocolate manufacturers have lowered the size of their products, including bars, and global chocolate prices have increased as well.
Due to Ghana’s disastrous crop, the country’s government, who sell all of the beans grown there, wishes to postpone the delivery of up to 350,000 metric tonnes this season, or roughly half of the cocoa beans they sold.
According to Ghana’s cocoa regulatory body, the nation aims to transition “some volumes, but not in those quantities”.
If 350,000 tonnes of cocoa are delayed, dealers and processors may lose almost $4,000 per tonne on the futures they purchased to protect their actual bean purchases, or roughly $1.4 billion overall.
Trade companies that use the futures market to hedge or lock in a price for cocoa they haven’t yet sold to chocolate makers include Cargill, Olam, and Barry Callebaut.
Laptops 1000The chief cocoa trader for a multinational trading company that specializes in agricultural commodities said,
“We’re sitting staring at our screens, barely trading,” speaking under a pseudonym since he was not permitted to speak to the media.
He claimed that because of the significant losses and uncertainties, trading in the global cocoa physical and futures market had stopped.
Large, diversified trade houses with significant pockets, such as Sucden, Olam, Barry Callebaut, Cargill, Touton, and Ecom, purchase much of Ghana’s cocoa crop.
