Bakers Journal

After steady climb, cocoa prices coming down

April 7, 2011
By Bakers Journal

April 7, 2011, Simcoe, Ont. – Recently there have been a steady stream of media reports warning that cocoa and chocolate prices are poised to skyrocket even higher.

“Chocolate eggs nearly double in price since last Easter,” reported the
Huffington Post on March 21. “Cocoa seen jumping 14 per cent on
prolonged ban by biggest exporter,” warned a March 16 Business Week
story. “Savour that chocolate while you can still afford it,” the Globe
and Mail advised in a Feb. 11 story sure to alarm chocoholics

The uncertainty around chocolate prices stems from the Nov. 2010 presidential election in the Ivory Coast, where approximately 40 per cent of the world’s cocoa beans are grown. The election results are widely accepted as ousting incumbent Laurent Gbagbo and elevating his opponent, Alassane Ouattara, to the presidency. In the months since the disputed election, the international community – including Canada and the United States – has urged Gbagbo to respect the results and cede power immediately. But Gbagbo, who is supported by the country’s army and pays its soldiers with revenues from cocoa sales, has refused to do so.

In January, Ouattara introduced a temporary export ban on the country’s cocoa beans. The move was designed to erode Gbagbo’s support in the army’s ranks and force him out of the office he has held since 2000. The ban was set to expire on Feb. 23, but was later extended until March 15, and then again through the end of the month. On March 28, with Gbagbo still clinging to power and the country creeping closer to all out civil war, Ouattara announced the export ban would remain in effect indefinitely.

In a statement, the internationally recognized Ouattara government warned that exporters contravening the ban may lose their licenses and be “banned from operating across the national territory.” However, Bloomberg reported, “In a separate letter to exporters dated March 29, the government said it was taking measures to reduce the impact of the export ban on the industry.”

In spite of Gbagbo’s repeated threats to levy financial penalties against, and even seize cocoa stocks from, companies that did not resume exports by March 31, major chocolate makers have so far respected the ban.

Although mainstream media have been pushing out a steady flow of doom and gloom headlines (the opening sentence of that Feb. 11 Globe and Mail story read, “In the not-too-distant future, chocolate will become a rarefied luxury, as expensive as caviar.”) this bleak picture doesn’t match reality facing Canada’s chocolate suppliers.

In an e-mail, a spokesperson for Barry Callebaut told Bakers Journal: “Our two cocoa processing factories in Ivory Coast continue to operate. Since the restrictions relevant to the cocoa business have been put in place, Barry Callebaut has suspended the exports of cocoa beans and cocoa products from Cote d’Ivoire.”
“As part of its contingency plan, Barry Callebaut has stepped up production in its cocoa producing factories in Ghana, Cameroon, USA, Canada, Italy, Germany, United Kingdom, France, Brazil and Malaysia,” the e-mail continued. The company also says it has increased purchases of beans from other countries, including Ghana, Cameroon, Indonesia, and parts of Latin America.

“We believe we have taken those steps necessary to enable us to honour our customer contracts and meet our commitments during 2011,” the e-mail stated.

Archer Daniels Midland (ADM) has also turned elsewhere to keep its customers supplied with cocoa. Last month, a spokesperson for ADM told that the company has suspended its operations in the Ivory Coast. Production at ADM’s other processing facilities in Ghana, Singapore, Brazil, Europe and the United States has been stepped up to cover any shortfall.

As of press time, the situation in the Ivory Coast appears to be stabilizing. Gbagbo is reportedly in negotiations with the United Nations to hand power over to Ouattara, fuelling speculation that the export ban on the country’s cocoa will soon be lifted.  This news has helped drive down cocoa prices, which reached a 32-year high of US $3,775 per metric ton last month.

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