Hershey Wants Special Permission to Buy Over 90,000 Metric Tons of Cocoa
Hershey Co. is asking the US’s top derivatives regulator for permission to buy a huge amount of cocoa through the New York exchange after global shortages sent prices to a record, according to people familiar with the matter.
The maker of Reese’s Peanut Butter Cups wants to take a position that will allow it to purchase more than 90,000 metric tons of cocoa on ICE Futures US, said the people, who asked not to be identified because the information is private. The request to the Commodity Futures Trading Commission equates to about 5,000 20-foot containers and is more than nine times the amount the exchange currently allows.
Hershey shares were down as much as 3.4% on the news. Cocoa futures in New York settled 6.8% lower.
The move comes as the global market is forecast to face a fourth year of supply shortages after the spread of disease and poor weather hurt crops in Ivory Coast and Ghana, which usually account for more than 60% of global supplies. Prices have already broken record after record, prompting Hershey’s Chief Financial Officer Steve Voskuil to warn that the company would face higher cocoa costs this year.
Cocoa is in such scarce supply that Hershey, one of the US’s largest chocolate makers, is petitioning for the rare exemption, said the people. The amount the company wants to buy is so big that it also exceeds a federal position limit of 4,900 contracts, or 49,000 tons, set by the CFTC.
Hershey said in November that it was “well hedged” in 2024, when it got into the market early. In an earnings call, Voskuil said 2025 cocoa costs would face a “pretty significant step up” from the prior year.
A spokesperson for the Pennsylvania-based company said Hershey has a “rigorous” procurement process and that it is “well covered” on its cocoa needs for 2025. The CFTC and ICE declined to comment.
Cocoa futures almost tripled in New York last year, boosting the cost of trading and forcing traders who can’t put up more cash as collateral to back their positions out of the market. Open interest, or the number of contracts outstanding, tumbled 65% last year, making the exchange less efficient. The cash crunch is also preventing some traders from moving beans from producing to consuming countries.
Global cocoa shortages are so large that it’s now much cheaper to take delivery of supplies through the New York exchange than buying in the physical market. As a result, stockpiles in exchange-licensed warehouses are dwindling, having declined more than 70% since May 2023, ICE data show.
The amount of cocoa Hershey wants to buy is equivalent to roughly all of the beans currently in exchange warehouses that are certified or could be certified for delivery against futures contracts in New York. A larger position limit is likely to send the price of earlier-dated futures to a significant premium above the later-dated ones, disrupting the futures market.
Still, there are more stockpiles in the world other than exchange-certified beans, and supply is starting to improve in smaller producing countries like Peru and Ecuador.
Hershey is being represented by Joshua Sterling, a partner at Milbank LLP in Washington, the people said. His name has been floated as a potential chair of the CFTC under the second Trump administration. Sterling declined to comment.
This wouldn’t be the first time Hershey upends the New York futures market. In 2020, at the height of the pandemic, the company took such a big position that it sent the premium the December contract commanded over March to the highest on record. The purchase was so big that it required special permission from the ICE.
In a note to clients, JPMorgan said Hershey could be trying to replicate what it did in 2020, when it took advantage of price dislocations to curb cocoa costs. Still, the current efforts “don’t have to be for the same reason or have the same directional impact,” analysts including Ken Goldman said in the report. “For all we know, Hershey may very well want to buy hard cocoa because of supply concerns. We also don’t necessarily believe all of 2025’s cocoa needs are hedged.”
