Oct 9, 2025

Michael Schlumpf, Head of Finance and, since July 2025, an Executive Board Member, explains in an interview with Communications Specialist Sandra Straub the measures we took to manage the price risk – and why this also pays off for smallholder cooperatives and our customers.

Michael, looking back, what was your team’s experience of the price changes in the cocoa market in 2024?

The cocoa crisis was also an extreme situation for us in the Finance Department – one that nobody expected, and certainly not to that extent, because the price level had been very stable for a long time. Historically, the market price for cocoa in the years leading up to the crisis was around 2’500 USD per metric ton. PRONATEC paid significantly higher prices of around 3,000 USD per metric ton, taking into account not only the world market price but also the premiums for organic quality and Fairtrade. There was hardly any significant variation in prices – fluctuations of 20 to 30 USD per day were already considered unusual.

Towards the end of 2023, prices began to rise steadily to approx. 4’500 USD per metric ton. They leapt the following year, doubling and tripling in a matter of months and peaking at 13’000 USD per metric ton. This was an unprecedented situation for the cocoa industry and the organic sector in particular, and we had to learn to navigate it.

That sounds like a huge adjustment. What specific impact did this development have for PRONATEC?

For many years, we had a reliable pricing system: as already mentioned, through the organic and Fairtrade premiums we always paid smallholders a price well above the world market level. This ensured fair incomes and long-term stability along the value chain. The cocoa crisis, with its soaring prices and extreme volatility, completely disrupted our financing system. All of a sudden, financing requirements were huge because we can only purchase the majority of our cocoa beans during a relatively short period, i.e. the main harvesting times. However, cocoa beans and semi-finished products are only sold later, with sales distributed evenly throughout the year. In other words, we have high short-term costs without generating revenue straight away.

To give an example: when we purchased a container load of 25 metric tons of cocoa at 3’000 USD per metric ton in the past, this cost a total of 75’000 USD. At today’s (realistic) example price of 8’000 USD per metric ton, the total cost would be 200’000 USD – for the same quantity. For 500 containers, we are talking about 100 million USD. We somehow have to prefinance these huge sums so that we can guarantee a reliable supply of cocoa beans for our customers.

How did we handle these increased financing requirements? Was there some kind of emergency plan?

No, we did not have an emergency plan, but we were under time pressure as it was close to the start of the main harvest in the Dominican Republic. The focus at the beginning of the crisis was on raising additional funds as quickly as possible. We were lucky in this respect to be able to rely on the trust and support of various long-term partners and customers who helped us out in the short term. At the same time, we were actively looking for new financial partners because we knew that we would no longer be able to finance everything ourselves at this price level.

We have since secured financial backers who share our commitment to organic, fair trade and smallholder cooperatives. This means we have sufficient financing available during the harvest period to prefinance the purchase of cocoa beans in the countries of origin, through our subsidiary YACAO, for example. Once the cocoa beans have been loaded onto a ship for transport, the financing partner changes. Refinancing starts from this point. While they are being shipped, our various departments plan the required repurchasing volumes and timing so that the cocoa beans are available for our production plant in time for the start of processing. Good organisation and precise arrangements are essential here.

So we obtain our financing capital from a range of investors and the cocoa beans act as security. But what about price volatility? Are we simply exposed to this risk?

No, we have taken additional steps to ensure that more significant market movements will not create difficulties for PRONATEC in the future. Of course, it is true that extreme price fluctuations entail a higher risk – and that is an understatement. To minimise our risk, we hedge the price with cocoa futures on the stock market.

Price hedging, futures … these terms are abstract jargon for many people. Could you explain how this applies in your day-to-day work and how things have changed compared to before the crisis?

We used to sign annual contracts at fixed prices and customers could then purchase the cocoa products when they needed them. Price movements were small, so we did not have to worry about risking big losses. This is no longer the case. We now secure our prices on the stock market via a broker – this process is known as hedging. It is a common risk management strategy to protect against price fluctuations in raw materials.

This is best explained with an example. Imagine that we sell cocoa products to a customer today on a calculation basis of 8’000 USD per metric ton of cocoa beans, but they will only be harvested and delivered in a few months’ time. We then purchase what is called a cocoa future on the stock market at the same time for the same price. By doing so, we are securing the current global market price of 8’000 USD per metric ton because the future is a contractually agreed forward transaction that – in simple terms – works like this: the buyer and seller agree to the purchase of a specific quantity of goods at the current price. However, they are only delivered on a pre-agreed date in the future. If the global market price for cocoa then increases to 10’000 USD by harvest time, the value of the future rises equally as forward prices move in tandem with the global market prices. So the gain we make on the future exactly offsets the additional amount we pay the producers. If, on the other hand, the global market price falls to 6’000 USD, it works the opposite way. The value of the future falls by the same amount. When the future is settled, the gains and losses balance out and we can guarantee our customers the contractually agreed price.

That sounds like a lot of responsibility and additional work for an SME. Do you feel that this step has been worthwhile?

Definitely! When done correctly and responsibly, hedging works like insurance. Without it, we would not be able to plan in advance or offer our customers longer-term contracts. They would then have no price security for their own contracts and liabilities. Hedging on the stock market means we are now in a position to guarantee longer-term price stability again. All of our business partners benefit from this, namely both our customers and the smallholder farmers who get the current global market price from us.

The increased workload is definitely noticeable in day-to-day work because hedging requires continuous attention; it is a full-time job. The team had to get up to speed with raw materials financing and hedging within a short time. The complexity should not be underestimated. We cannot go into detail here; it involves a number of factors. Above all, close coordination between Purchasing, Sales and Finance is crucial because every larger contract has to be hedged. We also always have to deposit a security, known as the initial margin, for the cocoa future. When there are strong market fluctuations, we may also have to provide additional collateral (margin calls). When the cocoa market skyrocketed in 2024, this became a major issue for some companies, as they could no longer finance the margin calls. In addition to precise liquidity management and appropriate risk awareness, an experienced team is also essential here.

Michael Schlumpf, Head of Finance at PRONATEC

Talking of the team: have there been any significant events or fundamental changes in your day-to-day work?

Our Finance team has grown from three to five people; tasks are now allocated very differently than before. The cocoa crisis saw the emergence of an entirely new situation, to which we had to respond quickly. We were forced to reorganise and venture down unknown paths. While establishing new financing mechanisms and hedging on the stock market was challenging, we are now well equipped when it comes to financing and are able to deal with volatility. Everyone is pulling in the same direction, our processes are solid and our Finance Department certainly holds its own compared to larger organisations or companies. We should be proud of this.

Looking back at the turbulence of the past 18 months, if you were to draw a line under that period, what would stand out most for you?

Firstly, it was great to see that we could rely on our customers. Their support and their trust was crucial in this challenging period.

Secondly, we have proven how quickly and decisively PRONATEC as a company can act and that we are in a position to implement a new business strategy within a very short time.

Thirdly, we now have appropriate tools at our disposal to enter into transactions with a longer time horizon. As things stand now, we have our price risk under control so that we can continue to act as a reliable partner, even in a highly volatile market.

Thank you, Michael, for the fascinating look at the world of finance!