(Bloomberg) -- Major cocoa traders are holding off buying beans in top grower Ivory Coast due a standoff on prices and a lack of clarity over who will bear the cost of implementing a newly-mandated traceability system.  

Cargill Inc., Olam International Ltd. and Barry Callebaut AG, the top three buyers, are among the exporters sitting out forward sales for the current season’s mid crop that runs from April to September and the next 2024-25 harvest, according to people familiar with the matter. The companies want a discount because of higher prices and dipping demand, they said, speaking on condition of anonymity as they’re not authorized to speak on the subject. 

Yves Kone, director of Ivory Coast’s regulator, Le Conseil Cafe-Cacao, acknowledged that some major buyers are holding off purchases, but declined to name them. 

Cargill, Barry Callebaut and Olam all declined to comment on their buying practices. 

Concerns of global supply shortages of the key chocolate ingredient has seen futures rally more than 45% this year to the highest in four decades. That’s raised concerns that exporters, who book beans and lock in prices as much as a year in advance, could make losses if the market dips ahead.

Ivory Coast’s CCC resumed forward sales in September — after putting them on hold while the nation mulled how to deal with the European Union’s new deforestation regulation, which kicks in at the end of next year. 

“We’re selling beans at the market price and adding the living-income differential,” Kone said. Any further discount would undermine the premium meant to boost farmers’ wages, he said.

Buyers there and in Ghana, which together account for two-thirds of global production, have to pay $400 per ton on top of the market price as the living-income differential. Additionally, the countries charge a premium for bean quality, although it has recently held at zero in the Ivory Coast. The CCC said some companies have pushed for the latter to flip to a discount, but the agency has ruled out that prospect.

Read more: Ivory Coast Seeks to Make EU Buyers Bear Cost of Ethical Cocoa

Exporters also want clarity on how much it will cost them once the country launches a tracking mechanism to comply with the EU’s regulations to ensure crops are not grown on deforested land, two of the sources said. 

West African growers are in talks with the bloc to push for multinational chocolate companies to bear the cost of ensuring that cocoa shipped to Europe complies with new norms.

While it isn’t yet clear who will pay, “it would be unreasonable to make the growers bear that cost,” Kone said. 

 

--With assistance from Alfred Cang.

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