Trading houses are facing at least $1 billion in losses due to Ghana’s failure to deliver cocoa beans this year. Consequently, they have been forced to liquidate the short positions they took to protect their cocoa investments. Ghana’s inability to deliver cocoa beans is the result of numerous factors, including bad weather, bean disease, smuggling, and illegal gold mining, which have reduced its production. Consequently, the West African country is delaying delivery of up to 350,000 metric tons, which amounts to nearly half of what it was supposed to deliver. Given its status as the world’s second-largest cocoa producer, the decision could lead to losses of about $4,000 per ton on cocoa futures, totaling around $1.4 billion. To offset their losses, these traders will likely charge higher prices to chocolate makers. However, the chocolate firms will likely find it challenging to do the same to their consumers, who are already buying less chocolate due to already high prices.
SOURCE: REUTERS