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In the past 48 hours, United Nations peacekeepers have been forced to leave bases in the Ivory Coast due to escalating violence in which several people died. While the northern part of the country is already in rebel hands, the President of the country is becoming increasingly non-compliant with international desires to honor a fair election. According to recent reports, the situation in the Ivory Coast has deteriorated to the point where civil war is once again becoming a real possibility. Among the most stable regions in West Africa for decades, the Ivory Coast has become just another African country with seemingly endless violence. Much of this is due to the tremendously low market prices for cocoa around the world. 90% of the country's export revenues come from the crop and it produces over 43% of the entire world's supply. During the 70's, 80's, and much of the 90's stable politics, a tropical climate, and a developed infrastructure allowed the Ivory Coast to become the dominant player in the cocoa. But in the past few years, depressed inflows into the country due to cocoa's low purchasing power have caused widespread poverty and social disturbances. With the country on the brink of civil war, large supplies of cocoa are becoming threatened. At $1600 per metric ton, cocoa is still 70% below its 1977 high and any attempt to make up for lost supply will take several years. Like the coffee plant, cocoa plants take several years to bear any fruit, making then unusual among agricultural commodities. On top of all this, the political situation in Nigeria, the fourth largest producer of cocoa in the world, has declined to the point where many oil workers are leaving the region. The potential for supply disruption for cocoa is far larger at the moment than for any othercommodity. The Commodity Investor is placing a buy recommendation today on cocoa at $1598/metric ton. |
