Major trading houses face potential losses of approximately $1 billion due to Ghana’s failure to deliver cocoa beans as scheduled this year.
Sources indicate that this situation has compelled traders to exit short positions amid surging cocoa prices.
Ghana has announced plans to delay the delivery of up to 350,000 metric tons of cocoa beans this season, nearly half of the contracted amount. This delay is expected to result in around $1 billion in total losses for cocoa traders and processors.
Large trading firms like Cargill, Olam, and Barry Callebaut rely on the futures market to lock in prices for cocoa they have not yet sold. They purchase beans months in advance with the intent to resell at a profit and hedge against price drops by betting on falling prices in the futures market. However, this strategy backfires when deliveries are delayed in a rising market.
According to industry sources, traders have been forced to buy back their short positions at significantly higher prices, leading to substantial financial losses. Although they anticipate eventually receiving the cocoa, traders have taken new short positions for May 2025 delivery at approximately $7,000 per ton. Should they receive the physical cocoa at $3,000 per ton, they still face potential losses of $4,000 per ton.
The cocoa market, currently in its third year of deficit, has seen prices double this year. Traders may attempt to pass on some of the increased costs to chocolate manufacturers, who, in turn, could struggle to transfer these expenses to consumers already reducing chocolate consumption.
Furthermore, market liquidity has dwindled as exchanges demand higher cash collateral to secure hedges, leading to increased price volatility. This situation has caused a significant slowdown in cocoa market trading, impacting both the industry and consumers alike.
