Susannah Savage of the Financial Times reports that chocolate makers are cutting back on hedging cocoa prices due to soaring futures costs, betting that prices will keep falling. Cocoa futures hit record highs in 2024 but have since declined, making long-term contracts less attractive. Some firms now buy beans month-to-month or use fixed-cost insurance. Similar pullbacks are happening in coffee, with major players like Starbucks reducing hedging amid price volatility. Savage writes:
Chocolate makers have slashed their use of hedges against price rises due to the soaring cost of futures contracts, in a bet that the huge bull market in cocoa is finally over.
Manufacturers typically use the futures market to hedge against price fluctuations, securing long-term contracts to lock in a set level. But surging cocoa prices have triggered big rises in the cost of hedging on major exchanges. […]
Instead, some chocolate companies have started purchasing beans on a short-term basis in the hope that prices — which have already come down from more than £10,000 a tonne in December to slightly less than £6,500 — will continue to fall. […]
Cutting hedges is “not necessarily a bad thing”, Parkman added. “If prices fall, it’s a good thing.”
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