Hershey Co (NYSE: HSY) has raised alarms about volatility in the ICE New York cocoa futures market, stating that it fails to accurately reflect real-world cocoa market conditions.

Key Issues Highlighted by Hershey

Disconnect Between Futures and Physical Market
Hershey argues that actions taken by ICE have contributed to a decline in liquidity and heightened price volatility.

High Margin Calls Driving Away Participants
According to Tricia Brannigan, Hershey’s Vice President for Procurement, rising margin calls discourage commercial traders, which decreases open interest in the cocoa market.

Speculator Influence Under Scrutiny
Brannigan has called on ICE to investigate speculative activities, suggesting they may contribute to price instability, although she did not provide specific evidence.

Cocoa Market Outlook

Cocoa prices remain elevated, with the ICE New York futures rising due to supply chain disruptions and increased demand. Hershey and other chocolate manufacturers might face additional cost pressures due to ongoing volatility. Regulatory reviews by ICE could result in necessary adjustments to the market in the near future.

Investor Insights

Hershey’s concerns illuminate potential inefficiencies within the cocoa futures market that could impact commodity pricing strategies for leading chocolate makers.

Bottom Line: Hershey’s warnings highlight how a volatile cocoa futures market could seriously affect pricing for major producers.