Cocoa prices are unlikely to plunge after the capture of Ivory Coast’s former leader Laurent Gbagbo potentially ended a civil war because chaos at banks and ports will keep curbing exports from the world’s biggest producer.
Gbagbo, whose refusal to cede power after elections in November triggered the conflict, was captured today after French troops and forces loyal to rival Alassane Ouattara besieged his home. Cocoa for July delivery rose 1.4 percent to settle at $3,028 a metric ton at 11:48 a.m. on ICE Futures U.S. in New York. Futures rose as much as 35 percent since the poll, retreating 19 percent since March 3 as investors bet Ouattara would prevail.
“Cocoa prices should come down by another $100, but not more, as there is a logistics nightmare waiting for the supply chain on the ground -- banking, storage, trucking, workers, cash,” said Luis Rangel, a vice president at ICAP Futures LLC in Jersey City, New Jersey. “No one will return until the guns are silenced.”
The surge in cocoa added pressure to world food prices the United Nations says reached a record in February. Ivory Coast exports slumped as much as 94 percent after the European Union imposed curbs on sales and Ouattara ordered companies to stop exports to cut off funds to his rival. That also hurt the economy, with cocoa, oil and coffee the country’s biggest sources of revenue and about 68 percent of people dependent on agriculture, according to the CIA World Factbook.
A.P. Moeller-Maersk A/S, the world’s largest container shipping line, said today it has a vessel sailing to Ivory Coast to load cocoa as soon as April 13.
“We have ships on the West Africa coast, so we are ready to enter as soon as it’s sufficiently calm at the terminal,” Sonny Dahl, Maersk’s director of West Africa services, said by phone from Copenhagen. “The big challenge, reading a message from my country manager, is getting cargo ready in ports.”
Cocoa for July delivery rose 1.1 percent to 1,910 pounds ($3,122) a ton on the NYSE Liffe exchange in London. Investors are concerned there also may be delays to exports because the new government has yet to establish some of the administration needed for sales.
“The capture of Gbagbo removes a lot of uncertainty, with the market now seeing little standing in the way to complete normalization of cocoa trade,” Keith Flury, an analyst at Rabobank in London, said in an e-mail. “The creation of a cocoa export tax system would be very high on the new government’s priority list.”
The 27-nation EU lifted curbs on the ports of Abidjan and San Pedro last week. About 440,000 tons of beans are being stored in exporter warehouses near Abidjan, an adviser to Ouattara said on March 14. That’s equal to about 12 percent of global supply in the 2009-2010 crop year, according to the London-based International Cocoa Organization.
The cocoa stored in those warehouses is probably still usable, Rik Balcaen, a director at Belgian chocolate manufacturer Belcolade, said April 7. Beans can be stored for as long as 10 years with the right ventilation and if they are pest-free, he said.
Global cocoa output will exceed demand by 119,000 tons in the year that began on Oct. 1, the ICCO estimates. Production in Ivory Coast may rise 6.7 percent to 1.325 million tons.
“The fact that the market continued to trade at a premium today shows that people want to be sure the war has ended,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock, a brokerage in Chicago. “Cocoa can fall to $2,650 only after the supplies are normalized, say in a month or two.”
Hedge funds have reduced their bets on higher prices for four consecutive weeks. Their net-long position in New York-traded futures shrank 3.3 percent to 13,064 contracts in the week ended April 5, according to data from the U.S. Commodity Futures Trading Commission.
There may also be delays in cocoa trading because Ivory Coast’s banking system needs to be revived, said Jonathan Parkman, joint head of agriculture at Marex Financial Ltd. in London.
“If you haven’t got any money and you can’t move cocoa without paying people, nothing is going anywhere,” he said.