Futures Industry News
Cocoa markets disrupted by Ivory Coast ban
Jan 25, 2011 12:00 AM
The Ivory Coast is the world's primary supplier of cocoa beans - and its political turmoil is having a powerful effect on the global market for the chocolate base.
The Ivorian Civil War ended in 2002, but the country remains perilously close to the brink of further violence. In October 2010, much-delayed elections finally took place. Incumbent president Laurence Gbagbo lost the vote to economist and former prime minister Alassane Dramane Ouattara, but refused to cede power.
The crisis grows increasingly severe, and it has paralyzed the country's economy, which relies heavily on the export of cocoa beans.
Some of the Ivory Coast's fellow members in the African Union are now considering a military mission to resolve the crisis, though Al-Jazeera reports that enthusiasm for such a mission is not high. Already, 260 have died in political violence in the nation, and the intervention of a foreign army could restart the bloody conflict that took so many years to bring to a close.
"The window for a peaceful negotiation is closing very fast," Kenyan prime minister Raila Odinga told reporters, according to the Qatar-based news service. "We will continue to walk the extra mile to find a peaceful resolution ... The use of legitimate force is there and we will say that it is the ultimate resort, the very last resort if everything else has failed."
The United Nations already has 9,000 troops in the country and will soon deploy 2,000 more, in addition to three armed helicopters.
The crisis represents a test for the African Union; while almost every ruler on the continent appears to be united in explicitly backing Ouattara and calling for Gbagbo's departure, there will inevitably be differences of opinion. The more autocratic heads of state must surely be watching their seats of power carefully, given the current turmoil in the Ivory Coast and in Tunisia.
According to Bloomberg, the opinions range from Senegal and Nigeria, who favor military action, to South Africa and Ghana's call for new negotiations. So far, Angola has been the only nation making the call for fresh elections.
Major international cocoa traders are now shutting down their operations in the country, at the request of president-elect Ouattara, who believes that the action will put overwhelming political pressure on his opponent.
Cargill has put its Ivorian operations on hold for the time being, while Archer Daniels Midland and Barry Callebaut say they have scaled back, reports the Financial Times. However, the political risk is double-edged: The international consensus is that Ouattara must be aided as he attempts to wrest control from the stubborn Gbagbo, but companies fear that if Gbagbo does retain power, he will retaliate.
"We are between a rock and a hard place," the head of an unnamed cocoa trading house told the FT. "We need help from someone before our operations and our staff suffer."
The suppliers may then try to tread a narrow line, fully committing to neither side while trying to keep their operations running. "I don't think exporters will totally obey the ban, but they cannot escape from that completely," Carsten Fritsch, an analyst at Commerzbank AG, told Bloomberg News.
At 3:40 p.m. EST, cocoa futures for March 2011 delivery on the InterContinental Exchange were up 3.31 percent to $3,293 per metric ton, after earlier rising as high as $3,380 per metric ton.
On the NYSE Liffe in England, cocoa futures rose to £2,187 per metric ton, after earlier cracking £2,280 per metric ton.
Don’t Miss Our News Updates!
Share dt News:
Follow our breaking news stories and get a unique take on current events that may impact the commodity futures markets. Multiple new articles are posted each weekday. Subscribe to our commodity news updates by email, and receive real-time updates with our RSS feed, follow us on Twitter @DanielsTrading, become a fan on Facebook to stay informed.
SPECIAL OFFER: Euro/Dollar in a Time of Crisis
Sign up for our FREE report and gain insight about the current global crisis through our extensive research and analysis!
Download this exclusive report as we examine current global events, the present impacts on market prices and volatility, and potential outcomes of the Eurozone crisis.
