Major trading firms face potential losses of approximately $1 billion due to Ghana’s failure to deliver cocoa beans this year.
According to sources from Citi Business News, this issue has prompted traders to close out short positions as cocoa prices rise.
Ghana is expected to postpone the delivery of up to 350,000 metric tons of cocoa beans this season, which is nearly half of the previous amount sold.
This delay could result in around $1 billion in total losses for cocoa traders and processors, as reported by Citi Business News sources.
Large trading companies such as Cargill, Olam, and Barry Callebaut use futures markets to secure cocoa prices before the beans are sold.
They purchase beans months ahead of time, aiming to resell at a profit. To guard against potential price drops, they also make bets on falling prices in the futures market.
This strategy is ineffective if there is a delay in cocoa delivery during a market uptrend.
Sources from Citi Business News indicate that traders had to repurchase their price-fall bets at significantly higher prices, resulting in substantial losses.
Traders still anticipate receiving their cocoa and have entered new short positions for delivery in May 2025 at approximately $7,000 per ton.
Nevertheless, they are expected to incur losses of around $4,000 per ton if they receive the cocoa at $3,000 per ton.
The cocoa market, already facing its third consecutive year of deficit, has experienced a doubling in prices this year.
Traders might increase prices for chocolate manufacturers to recoup some losses, but these companies may struggle to pass these costs onto consumers who are already buying less chocolate.
Market liquidity has also diminished, as exchanges require more cash collateral for hedges, leading to greater price volatility.
This situation has significantly slowed down cocoa trading, impacting both the industry and consumers.