Ivory Coast politics fuels hot cocoa market

ABIDJAN, Ivory Coast -- A struggle for power in this West African country has sent the price of cocoa beans up faster than a plate of chocolate bonbons gets cleared during an office party. But chocolatiers are saying it's anyone's guess right now about whether it will make those bonbons more expensive.

The political tug-of-war started after an election that it was hoped would unify the country, one of the world's major cocoa producers, after nearly a decade of civil war.

Trouble started when the incumbent president, Laurent Gbagbo, refused to give up power. To try to undermine Gbagbo's support, the internationally recognized president, Alassane Ouattara, Monday ordered a one-month ban on cocoa exports to hobble Gbagbo's ability to pay civil servants and maintain their loyalty.

Whether Ouattara's ploy will work is not assured. There are no guarantees growers in the politically volatile country will comply.

Nevertheless, the uncertainty sent cocoa prices soaring to a five-month high on Monday, although chocolate producers say it is anyone's guess how this will impact consumers.

Bloomberg News reported that commodities speculators, including hedge funds have more than quadrupled bets on a cocoa rally since early December after a disputed election left the rival presidents. Ouattara's ban may send prices to as high as $3,720 a metric ton, a Bloomberg survey of six analysts showed. That would be the highest since January 1979.

Despite the gyrations in the commodities market, the long-term impact on companies producing chocolate is unclear.

Companies usually have a few months' supply on hand already, and cocoa that was registered and paid for before Sunday is explicitly exempted from the order.

Cocoa futures on the Liffe commodities' exchange in London were up 3.9 percent Monday to 2,223 pounds per ton, the highest since early August, after trading as high as 2,290. Cocoa traded as low as 1,770 pounds in November.

In a joint statement, the Brussels-based European Cocoa Association and the Federal of Cocoa Commerce Ltd. in London said they hoped for a quick resolution of the political tensions.

Harvey Cabaniss, who sells Pierre Marcolini chocolates at Verde & Co. in London, said he was resigned to higher costs.

Cocoa, he said, comes from "probably not the most stable areas of the world, and I think that's why its always going to be a volatile product."

The United Nations, the United States, France and the African Union have endorsed Ouattara's presidency, and he is trying to run the country from a hotel under the protection of hundreds of U.N. peacekeepers.

However, Gbagbo, who has been in power for a decade, still controls the country's military and security forces.

Ivory Coast was divided into a rebel-controlled north and a loyalist south by a 2002-2003 civil war. The country was officially reunited in a 2007 peace deal, and the long-delayed presidential election was intended to help reunify the nation.