Ghana’s Cocoa Troubles Cause Squeeze in Amsterdam

Merijn Bruinse is caught in a high-stakes cocoa waiting game.

From his office overlooking the famous Rijksmuseum in central Amsterdam, Mr. Bruinse is fielding calls from frustrated customers, awaiting cocoa beans from Ghana bound for premium chocolate in Europe and Japan.

Ascot Amsterdam, the trading firm where Mr. Bruinse is managing director, is on the hook for those elusive beans. Shipments of Ghanaian cocoa expected in January and February are still missing, and could be as much as six months late, he says.

“The customers are getting a bit anxious and annoyed,” he says.

Ascot is one of several trading firms now awaiting those Ghanaian shipments.

But the problem extends well beyond the Netherlands. Ghana is expected to produce around 700,000 metric tons of cocoa beans this year, according to the International Cocoa Organization, while Cocobod, the government’s cocoa-purchasing body, has made a commitment to deliver 850,000 tons. Ghana sells beans to a range of countries including the US, Canada, Japan, China, Brazil and South Africa.

High cocoa prices last year fuelled by worries over the impact of Ebola on West Africa have already pushed up the price of chocolate.

Major chocolate producers, among them Hershey & Co., Nestlé SA and Lindt & Sprüngli AG, increased retail prices by as much as 8% this year. These are increases that remain even if the cost of cocoa falls.

The surprise drop in the cocoa harvest thia year has left the cocoa industry “scratching their heads,” says Victoria Crandall, a soft commodities analyst at Ecobank in Ivory Coast. The struggle even to deliver 700,000 tons, Ms. Crandall says, leaves questions about who will foot the bill for oversold supply.

Experts attribute the low harvest to a long list of factors, from dry weather to old trees, the depreciation of the Ghanaian currency, and a movement of labor from cocoa farms to gold mines.

The industry is still trying to figure out whether the Ghanaian cocoa board will pay a discount for the delayed shipments, says Arjen Thiescheffer, managing director at Cocoanect, a Rotterdam-based cocoa trading firm.

Mr. Bruinse is not optimistic. “Between the lines, everyone knows that they will not compensate you for it.”

Ascot, which operates as both a trading firm and a sales office for associations of West African cocoa farmers, is a tiny operation in a thin-margin business – there are just two people in the Amsterdam office. Mr. Bruinse handles the financial side, while his partner handles logistics.

Now he’s left tallying up the costs. For firms that can replace Ghanaian cocoa with cocoa from other countries, this means scrambling to source the beans in the spot markets.

But for those like Ascot that source specifically from Ghana, there are costs from a half-year delay in receiving beans, and the potential legal bills if waiting customers decide to sue. The cost of hedging future shipments will also hike up the bill, says Mr. Bruinse.

For now, all he can do is wait for next season’s beans to arrive – and find a way to relieve the stress. “I play squash. I do pretend to play golf, but my golf game sucks,” he says with a laugh.

But Mr. Bruinse, who calls cocoa trading his “first love”, acknowledges the anxiety of dealing with bad weather and missing cocoa is just part of the deal for trading in commodities.

“Whether you’re a cocoa trader or a sugar trader, the thing you do is mitigate your risk,” Mr. Bruinse says. “It’s our job.”

Source: wsj.com

By Katherine Dunn

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