Ivory Coast cocoa hit by disease, politics

By Lindsey Partos

- Last updated on GMT

Related tags: Cocoa, Chocolate, Cocoa bean, Côte d'ivoire

Costs for cocoa have fallen from a peak of $3000 per tonne in July, to $2551.33 on Monday, but reports of the damaging black pod disease in Ivory Coast could drive prices upwards, compounded by political uncertainty that may see chocolate buyers eager to build stocks.

Ivory Coast is the biggest global supplier of cocoa, contributing 38 per cent of this much sought-after soft commodity to the marketplace.

But with the new cocoa campaign on the horizon, prices are set to react to news that persistent rain in some of the country's key cocoa areas could encourage the onset of the virulent fungus Black Pod.

The cocoa plant is particularly susceptible to disease from the fungus Black Pod, which can destroy between 30 and 90 per cent of the cocoa bean.

According to a Reuters report this week, in the southern region of Divo, the average cocoa price jumped to between 400 and 450 CFA francs (€0.714) per kg from 350 and 400 CFA (€0.609) two weeks ago. In the western region of Soubre, in the heart of the cocoa belt, the average price rose to about 450 CFA francs, up from around 400 CFA francs in the previous week.

Contributing to the price equation are the upcoming national elections, on 30 November this year.

An armed rebellion in 2002 split the nation in two, and the country is still plagued by inner strife. There are hopes that the upcoming elections may ease years of political, ethnic and regional tensions that deteriorated into the civil war of 2002. Ivorian President Laurent Gbagbo's term expired three years ago but he has remained in power because the elections were postponed several times.

But the outcome of the election will be keenly observed by the world's cocoa processors and manufacturers who source a large swathe of their supplies for their global businesses from this one region of Africa.

Most of the cocoa cultivated in Africa is exported to the major centres of cocoa consumption in Europe and North America, with the Netherlands and the US maintaining their positions as the world's two leading cocoa processing countries. So, while cocoa is largely produced in developing countries, it is mostly consumed in industrialised countries.

For cocoa, the buyers in the consuming countries are the processors and the chocolate manufacturers. A few multinational companies dominate both processing and chocolate manufacturing. Barry Callebaut is the biggest global manufacturer and distributor of cocoa, followed by US firms' Cargill and Archer Daniels Midland, and Swiss food powerhouse Nestle.

Large international food companies such as Nestlé, Mars, Hershey Foods, and Cadburys dominate in the area of widely distributed mass-market branded chocolate.

In terms of the market, boom and bust effects characterise prices in the cocoa cycle, estimated to roll out over a period of 20 years.

Prices for cocoa mainly respond to supply and demand factors: during boom periods there is a supply surplus that results in falling, and then stagnating, prices. When low prices kick-in due to over production, farmers are want to switch to other crops, creating a drop in supply and permitting world prices to rise again.

As such, in recent months, as demand pushed supply lines, the valuable cocoa bean crashed through the $3000 barrier in June, with prices soaring on the London and New York futures market.

Since then, prices have slightly dampened with London futures closing on 30 September at £1495.00 (€1896) a tonne, and New York futures on the same day at $2551 (€1832) a tonne.

But these figures notwithstanding, as Laurent Pipitone from the International Cocoa Organisation pointed out to ConfectioneryNews.com, in the last 30 years, the price trend for cocoa is more downward. In the 1970s, prices flew, in constant terms, five times higher than today. An inflationary phenomenon spread over many commodities at the time.

Related topics: Commodities, Cocoa & Sugar

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