Cocoa crisis builds in Ivory Coast

 

The world’s eyes may be on Libya, Col. Gaddafi’s battle to retain power and the rising oil price.

But further down the African coast, perched on the Gulf of Guinea, lies Ivory Coast, where Laurent Gbagbo is fighting to stay in office after losing elections last year, and the country is on the brink of civil war, forcing up the price of cocoa to near 32-year highs. 

Late on Monday, Gbagbo’s government announced it would buy beans at a fixed price from farmers and then try to sell them on the world market, in a de-facto nationalisation of the sector.  The US state department said the move “amounts to theft”. In response, Ouattara – the internationally recognised winner of the election – has said that any exporter that co-operates with Gbagbo will lose their licenses when he takes power in the world’s biggest producer of cocoa.

Gbagbo’s announcement follows tough EU sanctions and a ban on cocoa exports by Ouattara, both moves designed to starve Gbagbo of the estimated $150m a month he needs to pay civil servants and the army.

In practice it is not clear how Gbagbo and his embattled administration could easily assume the reins of the cocoa sector, with its complicated and often expensive logistics. While in neighbouring Ghana, the state-run cocoa marketing board, which sells its cocoa forward, borrows money to finance purchases from farmers, it is not immediately apparent who would lend money to Gbagbo or – given tough sanctions – who would buy Ivorian beans.

“He hasn’t got the logistics and he hasn’t got the buyers,” one trader told beyondbrics. “The EU and the US are by far the biggest buyers. Asia is growing, but it is tiny, tiny in global terms. Who the hell is going to buy it?”

Added another: “It is very hard to see how anyone outside is going to want to be involved in that cocoa.”

The announcement has heightened fears about the fate of the stocks in the ports of Abidjan and San Pedro, now believed to total almost 500,000 tonnes, a hefty chunk of a global annual crop that usually exceeds three million tonnes. At current prices, stocks are valued at $1.7 billion.

Gbagbo’s officials have previously warned exporters that they would have to pay export tax on beans they had been banned by Ouattara from shipping. This had prompted anxiety that stocks would be confiscated, fears now intensified by Monday’s announcement.

“There is an enormous pressure on the industry who have stocks down there. They are apoplectic with worry,” one trader said.

Industry hopes the beans will start to flow before chocolate company stocks start to run low. The stock can’t stay there forever, one trader said, but he added: “it isn’t causing unsolvable difficulties for factories outside of the Ivory Coast right now”.