Could Ivory Coast turmoil make chocolate more expensive?
- 22 December 2010
- From the section Africa
Chocolate lovers everywhere have reasons to be nervous about the political turmoil in Ivory Coast. The West African nation produces nearly 40% of the world's raw cocoa.
And without cocoa, of course, there would be no chocolate.
Already the wholesale price of this crucial raw ingredient in one of the planet's favourite foods has doubled in the last four years.
And that was before the single largest producer of the commodity began its recent slide towards conflict.
So will Ivory Coast's problems push up the price of a bar of chocolate in the shops?
In some respects they already have.
The current stand-off between incumbent President Laurent Gbagbo and Alassane Ouattara, the man held by the United Nations to have won recent elections, follows years of tensions.
"The tensions have starved Ivory Coast of investment and sapped the confidence of cocoa growers," Laurent Pipitone, an expert in economic issues at the London-based International Cocoa Organisation, told the BBC.
"It takes three years for a cocoa bush to become productive after it's been planted," he says.
With the political outlook uncertain, farmers in Ivory Coast have been less willing to take the financial risk and put in the effort required to grow more cocoa, which means the country's productive capacity has gone into gradual decline.
This has been one reason why world cocoa prices have risen in recent years.
But intriguingly, the general view among analysts seems to be that the latest escalation of political tension will not make matters much worse than they already are.
That is partly because of the nature of cocoa production. Ivory Coast's crop is produced by thousands of independent small farmers.
The chances are that in the short term they will carry on working, whatever the political environment.
"The farmers need the income," explains Mr Pipitone.
"They may stop planting new cocoa plants but they won't stop producing with what they've already got," he says.
He also believes the growing political crisis will not stop the farmers getting their products to market.
If the normal channels for selling their products get closed off by unrest in the main city, Abidjan, Ivory Coast's farmers will simply move more of their cocoa in small quantities across borders into neighbouring countries where they can sell it, he believes.
However, the international price of cocoa has risen about 12.5% since early November as a direct consequence of the problems in Ivory Coast.
Cocoa is traded in two places: London and New York.
The price - currently around $3,000 (£1,900) a tonne in New York - is still actually a lot lower than it was in the early part of 2010.
In New York, the price hit a 30-year high of around $3,510 (£2,350) a tonne in December 2009. In London, the peak came a few months later in July.
At those times the world really was facing a real prospect of a cocoa shortage, which made the price shoot up.
The key issue then was not so much political uncertainty in Ivory Coast - though that was a factor - but the impact of disease.
Ivory Coast is the world's largest cocoa producer but Ghana and Indonesia are also important players.
This time last year, Ghana's cocoa industry was battling against "black pod" and "swollen shoot", while Indonesian farmers were up against "VSD" (Vascular Streak Dieback).
Chocolate lovers will be relieved to know that all these forms of disease appear to be on the wane.
Indeed, this year, after a run of poor harvests, Ghana's cocoa farmers have enjoyed a bumper crop.
Higher exports from Ghana are expected to partly offset any shortfall from Ivory Coast.
Ivory Coast has suffered similar disease issues to neighbouring Ghana but not to the same extent.
Its problems have been more of a political nature.
The net effect is that cocoa prices are higher than they were several years ago, partly due to the ongoing impact of tensions in Ivory Coast.
But prices are not as high as they were a few months ago when the main issue was disease in Ghana and Indonesia.
So what does all this mean for the cost of a bar of chocolate?
It is hard to know exactly.
Cocoa is the ingredient that makes chocolate special but industry experts say the raw ingredient only accounts for 6-8% of what the consumer pays for the final product.
The rest is partly the cost of other ingredients such as sugar and milk, but more importantly it includes manufacturing, distribution, advertising and the chocolate makers' profit.
Nonetheless, analysts say high cocoa prices over the last few years have had an impact on the way chocolate is made and sold.
It is reported that some manufacturers have changed their recipes, reducing the amount of raw cocoa they use.
Others have reduced the size of the products they sell while keeping the price the same.
The pricing strategies used by the world's major chocolate makers are, it seems, every bit as complicated and hard to unravel as the political intrigues in Ivory Coast.