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Cocoa Prices Rise Over Ivory Coast's Export Ban

Cocoa Prices Rise Over Ivory Coast's Export Ban
1/25/2011 6:40 AM ET

The export ban announced by the alternative government of Ivory Coast caused a surge in cocoa prices in the international market.

Alassane Ouattara, who won Ivory Coast's presidential elections, wrote to the country's cocoa and coffee exporters on Monday asking them to stop exporting the much-valued bean for one month to put pressure on the defeated President Laurent Gbagbo, who refused to cede power.

The call had immediate effect on the market, initially pushing prices up by over seven per cent in London trading before dropping back to a rise of just over 3.5 per cent by close of trading on Monday.

Cocoa prices jumped 7.4 per cent on Tuesday morning in London, reaching GBP2,307 (US$3,638) per ton in response to the announcement. They have since stabilized at GBP2,211 (US$3,503), an increase of 2.9 per cent on yesterday's price.

Cocoa futures for the March delivery market reached US$3,311 per ton, their highest level in a year.

New York ICE second-month cocoa futures jumped more than four per cent to a one-year high of US$3,340 a ton. Prices went up by US$137 in New York and GBP60 in London.

If the trend continues, it could lead to an increase in the price of chocolate, reports quoting experts say.

Export ban would have a huge effect on the world cocoa trade, leading to a shortage in supply in the wake of increase in demand from western consumers, coupled with new demand from emerging markets such as Brazil, UAE and Saudi Arabia.

Traders in Ivory Coast say that the export ban will push up cocoa prices - already up 14 per cent since November's controversial election.

Ivory Coast is the world's largest producer and exporter of cocoa, accounting for around 20 per cent of GDP, and any export ban would strain the Gbagbo government's coffers, as the administration is already reeling under sanctions imposed by the United States and the European Union.

Bloomberg quoted Malick Tohe, an adviser to Ouattara's government, as saying that the main cocoa exporters in Ivory Coast have agreed to enforce month-long export ban.

However, it is not clear if the export ban can be enforced by the alternative government, as Ouattara is blockaded inside a hotel in capital Abidjan for nearly two months, while Gbagbo has control of all state institutions.

A "presidential order" threatens national and international sanctions against any producer or exporter who continue to export the two revenue-earning commodities, as it would be considered as "financing the illegitimate regime" of Gbagbo.

He has the support of the leading players in the West African nation's cocoa industry.

Gilbert Ano, a Gbagbo ally who heads Ivory Coast's cocoa body CGFCC, convened a meeting of cocoa exporters in the country, and urged them to ignore Ouattara's call for export ban.

A statement by the Federation of Cocoa Commerce and the European Cocoa Association said "the cocoa trade and industry are working closely together to address the challenges that this situation places before us and indeed the whole cocoa supply chain from farmer to consumer."

Several attempts by African leaders to resolve the ongoing political crisis failed as Gbagbo continues to remain in power unwilling to accept defeat alleging that the November 28 polls were rigged by Ouattara's men in rebel areas.

More than 200 people were killed in post-poll violence and an ensuing crackdown on Opposition activists by security forces loyal to Gbagbo after the country's Constitutional Court rejected a declaration by the Independent Electoral Commission (IEC) that Ouattara had won the presidential run-off.

While Ouattara is backed by the international community, Gbagbo has the support of the country's leading Generals.

The AU and ECOWAS have suspended Ivory Coast until the democratically-elected President effectively assumes state power.

The U.S. and the European Union have imposed travel restrictions on members of Gbagbo's regime, as part of exerting pressure on him to step down.

Meanwhile, U.S. Assistant Secretary of State Philip J. Crowley welcomed the decision by Cargill, a U.S.-based producer and marketer of food and agricultural products, and a major player in the industry, not to buy Ivory Coast cocoa.

Speaking to reporters, he said America supports Outtara's call for a month-long ban on cocoa exports. "Our Embassy is in touch with relevant players on this. We are working closely with the EU, and their sanctions have a great deal to do not only with the export of cocoa, but its ability to be transported outside of Cote d'Ivoire," he added.

He made it clear that "it is part of our strategy to deny Laurent Gbagbo the resources so that he - continue to buy support from the military and political actors, and we hope that this will help convince him to step aside."

by RTT Staff Writer

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