Cocoa futures war

Synopsis

On March 30th, the CME Group and Intercontinental Exchange launch competing Euro denominated contracts in the Coco Futures Market. Edward George, head of research at Ecobank, discusses the importance of these contracts for cocoa farmers and chocolate producers. Futures contracts are vital for ensuring a steady flow of cocoa from farmers to major chocolate companies like Mars, Mondelez, and Nestle, which control about 60% of global cocoa production. These companies rely on futures contracts to secure their cocoa supply and manage risks associated with price fluctuations and seasonal variations in cocoa availability. The CME Group's entry into the market marks a significant shift, as it introduces a physically delivered cocoa contract, challenging the long-standing dominance of the London and New York contracts, which have been priced in pound sterling and US dollars, respectively, since 1928. Both exchanges aim to capture market share with their new Euro contracts, intensifying competition in the cocoa trading landscape.