The futures market
Traders, brokers, and agents in producing countries handle the marketing of cocoa beans and products, while the futures market allows buyers and sellers to negotiate contracts for future deliveries. The contracts are registered with a clearinghouse. Via this agency, a delivery commitment can be nullified by completion of a sales contract for the same quantity and month of delivery. The most important futures markets are in London and New York, which set the global price of cocoa.
The role of traders
Traders act as intermediaries between producers and buyers, and can take cover against risks through futures market contracts. In this way, they protect themselves, their suppliers and their buyers against price fluctuations, while earning a margin. Traders provide their clients with additional services, for example by financing transactions in advance on behalf of their suppliers or buyers, or by securing certain types of cocoa for their clients, which the latter might have otherwise bought under less advantageous conditions.
An important source of income
As a raw material, cocoa is an important source of income for many producing countries. To navigate fluctuating yields and prices, the government in certain producing countries plays an active role in the cocoa market. Ghana and Côte d’Ivoire, for example, set a farmgate price for their domestic cocoa production and introduced a joint Living Income Differential (LID) in 2019 to ensure a living income for cocoa farmers.
Transport and storage
Cocoa beans are transported in jute sacks, which were also traditionally used for shipping. More recently, bulk transport, where cocoa beans are loosely dumped into containers, has become more common. Due to climatic conditions that are not optimal for quality preservation, cocoa beans are not usually stored and processed in producing countries.
Europe is a major cocoa trade and logistics hub, with high-tech warehousing companies efficiently managing quality control, storage and transport. Upon arrival, consignments are inspected for quality and weight, with damaged beans being separated. Warehouses also handle documentation and provide cocoa blends tailored to client specifications, ensuring reliability and flexibility in the logistics chain.
