Hershey buys futures market cocoa amid concerns over West African support scheme
US confectionery company Hershey has reportedly moved to buy up to 30,000 tonnes of cocoa on the New York Futures trading market, which is not subject to the new Living Income Differential (LID) scheme designed to financially boost farmers’ wages in Ghana and Ivory Coast, writes Neill Barston
According to the Financial Times, the major chocolate business, which last year celebrated its 125th anniversary, made its latest deals amid pressure on product demand amid the ongoing global pandemic.
The futures market, largely dominated by hedge funds and commodity buyers, does not typically attract physical product buyers, but the premium price now being paid to farmers in West Africa is thought to have influenced the decision of Hershey to seek out alternative buying sources.
However, as the company explained, it has committed to buying its 2020/2021 season using the LID scheme, and stressed that it remains focused on its sustainability work.
Confectionery Production approached Hershey for a comment on the situation. The company issued the following statement on its activities. It said: “Hershey has long supported initiatives that improve the incomes and livelihoods of farmers. This includes supporting and participating this year in the Ivorian and Ghanaian Living Income Differential as we buy 2020/2021 season cocoa based on the needs of our business. All 2020/2021 cocoa purchased within our supply chain since the implementation of the LID in West African countries includes this price premium. Beans sold prior to the implementation of the LID would not include the premium.
“While we do not discuss details of our specific buying and hedging activities, we buy cocoa from a variety of suppliers and sources to meet our ongoing business needs. Our commodity purchases and strategies ebb and flow with our business needs and demand for our products. However, we do not discuss specific details for competitive reasons. Sometimes our purchases are based on hedging pricing fluctuations in the market and sometimes our purchases are based on ensuring sufficient supply to meet our needs well into the future, especially in times of uncertainty.”
The spokesperson added that the business remain deeply committed to its cocoa sustainability work with producer governments as it aims to help tackle root causes of poverty, as well as assist with ending deforestation.
Furthermore, the company said that in addition to its engagement with the LID farmer payments, it is investing in farmer training to enable growing more cocoa on less land and improving productivity, as well as helping enable agricultural diversification with alternative crops and other income-generating measures.