The price of cocoa soars as Ivory Coast bans exports
THE president-elect of the world’s biggest producer of cocoa – the Ivory Coast – banned cocoa exports for a month yesterday, causing the price to jump 7 per cent to £2,307 a tonne in early London trading, a 7.4 per cent rise from Friday’s close – the highest price in six months.
The ban has been introduced because the leader recognised by the UN, EU, US and the African Union as president of the Ivory Coast, Alassane Ouattara, hopes to wrestle control from his rival, Laurent Gbagbo, who refuses to admit electoral defeat. Ouattara hopes the ban will sever funds Gbagbo is using to control the civil service and the army.
ENFORCING THE BAN
Ouattara has issued a letter demanding an end to exports. Despite this and the international sanctions announced, many analysts doubt that a ban could be successfully enforced.
There are also legal reservations about the precise meaning of Ouattara’s letter. Some have suggested that only new unregistered cocoa beans are included in the ban. This interpretation could potentially leave the 300,000 tonnes of cocoa beans already registered in Ivory Coast warehouses free for export – alleviating the supply situation to some degree.
But even if the ban is unsuccessful, the uncertainty of the situation remains. Alex Vines, head of Chatham House’s Africa programme, explains: “We are in a protracted power struggle and there is a real danger that Cote d’Ivoire [Ivory Coast] could return to all out civil war.” The insecurity of this situation is likely to cause a surge higher in the cocoa price.
The extent of this uncertainty was seen from market fluctuations yesterday. The cocoa price fell back to £2,202 a tonne and to £2,170 for delivery in May.
This tragedy unfolding in the Ivory Coast must not be taken lightly. Those speculating on the trade should tread lightly. The weight of international concern and the potential for the situation to escalate is great. The international food producer, Cargill, has already suspended trading with the region. Others are showing signs that they may follow.