Sales, Trading, and Shipping Cocoa Beans 

Sales, Trading, and Shipping Cocoa Beans 
Cacao tree

Benjamin Akane

Agriculturist specialized in the Ghanaian Cocoa system

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Cocoa is sold to either Local Processing Companies or international grinders. New data from Ghana’s Cocobod (the agency coordinating the Cocoa production sector) showed that processing of the commodity from its raw form into other products has increased from 30% to about 34%. Ghana’s government is projecting to have about 50 percent of its cocoa processed into refined products such as Chocolate and Cocoa beverages. Cocoa beans that do not meet international requirements are typically sold to local grinding companies. Ghana’s cocoa grinding sector is dominated by a handful of multinationals and the former state-owned grinder, Cocoa Processing Company (CPC). Switzerland’s Barry Callebaut, the USA’s Cargill, and OLAM Processing Ghana Ltd vie for the top share of the grind, with capacities of 67,000 MT, 65,000 MT, and 43,000 MT, respectively.

Table 4: List of cocoa processing companies, installed and utilization capacities in Ghana (Tonnes) 2020.

No. Company Installed Capacity Utilized Capacity
1. Cocoa Processing Company (CPC)64,500.0028,486.17
2. Barry Callebaut67,000.0056,935.00
3. BD Associates32,000.0032,535.24
4. Niche50,000.0046,425.73
5. Cocoa Touton30,000.0028,289.46
6. Cargill65,000.0075,426.00
7. Olam43,000.0034,733.00
8. Plot32,000.0015,357.99
9. Wamco55,000.009,296.26
10. Real Products30,000.00
11. Afrotropics15,000.00
 Total 483,500.00 327,484.85

Source: Cocobod

Supply Chain Procedures 

The industry is 100% regulated by COCOBOD, and Cocoa is delivered to COCOBOD by LBC’s in two ways:

Primary Evacuation  

The LBCs use their own vehicles or outsource tractors/ trucks to transport the cocoa from the villages/ farm gates to the district depots or centers.

Secondary Evacuation  

The cocoa produce is transported from district depots or centers to designated centers known as Takeover Centres. To ease the congestion of trucks from the farm gates to the depots (or Takeover Centres), evacuation quotes are issued to the LBCs to regulate the specified number of a truck that each LBC sends to any takeover center each day.

The quality Control division (QDC) is invited to inspect the quality of the beans and ensure it complies with regulatory policies. LBCs receive the Cocoa Takeover Receipts (CTORs) after the Cocoa is handed over to the Cocoa Marketing Company (CMC).

The competition among the LBCs to ensure that their produce reaches COCOBOD on time is comparatively high.

The calculation of the bonus and the distribution of the bonus to the cocoa farmers are perhaps the most innovative institutional arrangement to influence price stability and fairness within the cocoa chain. The Ministry of Finance states that farmers are protected from price falls, and only positive adjustments in the producer price are possible.

Trading & Shipping Cocoa Beans 

Regarding cocoa trading, a clear distinction must be made between actual or physical markets and futures or forward markets. Nearly all cocoa from originating countries is sold through the physical market. The physical market encompasses the type of transaction most people normally think of when discussing commodity trading. The structure and length of cocoa marketing channels vary from region to region within a producer country and also between producer countries. At one end of the spectrum, the marketing channel between cocoa farmers and exporters includes at least two intermediaries: small traders and wholesalers. The first buy cocoa beans directly from farmers and visit them individually. In a second step, the small buyers sell the beans to wholesalers, who in turn resell them to exporters. Conversely, cocoa beans are sold to exporters by farmer cooperatives or even exported directly by the cooperative. The former is typical of Ghana, where cocoa sales are made to the international cocoa market through at least two intermediaries, namely the LBCs and a subsidiary of COCOBOD, CMC.

 At the port

Cocoa beans are stored in warehouses once they arrive at the port of export, graded, and then loaded into cargo ships. Cement, non-flammable flooring without cracks or crevices where insects might hide should be used in warehouses. To avoid floods and enable water to drain away, the warehouse’s floor elevation should ideally be higher than the terrain nearby. Due to the high moisture content and wide variation in the quality of the beans, cocoa beans are sometimes treated in conditioning factories, most of which are housed in port warehouses. The process of manually or mechanically conditioning beans is also used to combine beans of different quality levels.

Cocoa Grading 

The countries that produce and use cocoa have different grading systems. The Federation of Cocoa Commerce Ltd. (FCC) and the Cocoa Merchants’ Association of America, Inc., the two major worldwide cocoa trade groups, have established standard standards that have evolved on the physical market (CMAA). For instance, the FCC separates cocoa beans into two grades: well-fermented beans and fair-fermented beans. Fewer than 5% mold, less than 5% slate, and less than 1.5% foreign material are required in well-fermented cocoa beans samples. Fewer than 10% mold, less than 10% slate, and less than 1.5% foreign material are required in a fairly fermented cocoa beans sample. The so-called cut test is used to conduct these tests. In such a test, a specified quantity or weight is counted off a specified quantity or weight of cocoa beans, evaluating them after being split lengthwise through the center. The number of moldy, slat, insect-damaged, germinated, or flat beans are counted separately.

Shipping

After being graded and put onto cargo ships, cocoa beans are shipped in fresh jute bags or bulk. Since it can be up to 1/3rd less expensive than standard shipping in jute bags, shipping cocoa beans in bulk has gained favor in recent years. The so-called “mega-bulk” approach is used to load loose cocoa beans into either shipping containers or the ship’s hold. The largest cocoa processors frequently use the latter mode.

Cocoa Futures Contract 

A promise to deliver or take delivery of a specified amount and quality of cocoa beans at a predetermined location and time in the future is known as a cocoa futures contract. Typically, cocoa futures contracts are used to reduce the risk of unfavorable price changes rather than to guarantee the supply of cocoa beans. All contract conditions are uniform and predetermined. As a result, cocoa futures contracts are interchangeable, except for delivery time. Cocoa futures contracts can currently be exchanged at ICE Futures U.S. (New York), ICE Futures Europe (London), and CME Europe (London).

Before March 2015, only British pounds sterling and U.S. dollars were used to quote cocoa futures contracts. Although a third of the world’s cocoa production is processed in the Eurozone, nearly half of the traded cocoa comes from Côte d’Ivoire, Cameroon, and Togo (whose currencies are pegged to the Euro). As a result, new Euro-denominated contracts were introduced in March 2015, reducing the need for the cocoa trade to hedge against foreign exchange risks. Cocoa futures contracts now support the three currencies.

These regulated markets offer the infrastructure and trading platforms needed to connect buyers and sellers. They also establish and enforce rules to guarantee that trading occurs in a free-flowing market. Due to this, all offers and bids must be submitted electronically through the exchange’s “Clearing House” using the order-entry trading system. Because of this, the Exchange’s Clearing House serves as both the buyer and the seller to all sellers and purchasers.

Participants in the futures market can be divided into two categories: commercial (i.e., hedgers) and non-commercial traders (i.e., speculators). Commercial traders are market players who make counterbalancing trades in the futures market in an effort to prevent or minimize a potential loss in the cash market. In contrast, non-commercial traders put their own money at risk by trading futures in a product they do not manufacture or use in the hopes of profiting from price fluctuations.

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( Dohmen, et al. 2018)  Temperature changes, drought, and prolonged dry season affect the flavor and overall quality of the product

(Neilson, 2007) Unlike Farmers in West Africa, Cocoa farmers in Latin America tend to ferment the cocoa pulp surrounding the beans using wooden boxes. In Indonesia, farmers rarely take part in the fermentation process because their production is valued mostly for cocoa butter which is unaffected by fermentation

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Cacao Fertilization and Nutrient Requirements
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Cacao tree Pruning
Yield, Harvest, Handling and Storage of Cacao
Sales, Trading, and Shipping Cocoa Beans

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