Monday, March 7, 2011

Rising prices of cocoa beans, sugar and cocoa butter.


Our US newspapers in December 2010 and January 2011 were filled with bold headlines that the price of cocoa was going up.  A few people asked me with deep concern what was going to happen, how much more expensive was their favorite chocolate going to become, and if I thought a shortage of chocolate would be coming to the US soon.  I don't know. As a micro business, the costs to run it vary greatly as a matter of course and I can only watch and wait for the future to unfold. I will venture a guess that prices will rise and fall and then rise again as instability in the Ivory Coast continue.
The Ivory Coast provides a huge percentage of cocoa products to the western world and cocoa beans play an important role in the current call that the EU support a sanction of this product.  The hoped for result is that this will stop the large amount of monies flowing into the country that pay the civil servants, encompassing the military, police and other government employees.  If the civil servants don't get paid, maybe one man will stop being president and another will take his place.  Of course, this is an over-simplified view.
The middlemen, who include farmers, exporters and others, burned bags of cocoa beans in protest of the sanctions.  They have families to feed and the sanctions make this virtually impossible. Commerce is tied to politics and fear of lack is a huge motivator in future prices and when banks stop working money stops flowing.
I do not believe that the large cocoa conglomerates are going to go bankrupt any time soon. They will use cash instead of banks to do their business and the ties to this country are long. But the farmers and small businesses will bear a greater proportional brunt of price volatility on both sides of globe and consumers must decide how much it is worth to them.
And don’t get me started on the price of oil.

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