by Agrimoney.com
A failure to resolve quickly Ivory Coast's worsening political crisis could cause a longer-lasting impact on cocoa supplies, by deterring farmers from undertaking the husbandry needed to maximise the next harvest.
It was not too late for the settlement of a power struggle between Alassane Ouattara, the winner of Ivory Coast presidential elections in November, and Laurent Gbagbo, the incumbent premier who refuses to stand down, to puncture the rally in cocoa prices.
The total of 475,000 tonnes of cocoa sitting in Ivory Coast ports, after Mr Ouattara, the UN recognised president, forbade shipments, meant that "any sign of a potential lifting of the ban could send prices sharply lower", Hightower Report analyst Terry Roggensack said.
Ivory Coast, the world's top cocoa grower, should produce 1.3m tonnes of the bean in 2010-11, according to analysts at VM Group.
Charts suggested a pullback potentially to $3,185 a tonne, representing the loss of half gains during the recent rally, could be on the cards for New York cocoa futures, a decline of well over 10%.
"We could turn on a dime," Mr Roggensack said.
'Needs to happen soon'
The point was echoed by Kona Haque, at Macquarie in London, who said there was "a lot of cocoa out there".
Indeed, Ghana, the second-ranked producer, on Tuesday reported a 40% jump to 706,600 tonnes in purchases of the bean by private buyers reported to Cocobod, the country's cocoa industry regulator.
However, Ms Haque added that if a political settlement was to fix the cocoa market, "it needs to happen pretty soon", before risking damage, through grower neglect, on future crops. Ivory Coast officially starts its main crop in October 1, with the mid crop starting in early April.
"If there is no resolution, there is no incentive to prepare for the next crop," she said.
"Why apply fertilizer to a crop, when you can't even sell it?"
Furthermore, even if growers wished to fork out for inputs, the near-collapse of the country's banking system had cut the obvious route to funds.
"It is the risks for the next crop which are having a big impact on the market," she said.
Sanctions working?
The comments came as cocoa returned within $50 of a 32-year high in New York, before easing to stand 0.5% higher at $3,680 a tonne for May delivery, as of 15:45 GMT.
London's May cocoa lot was 0.4% higher at £2,356 a tonne.
Mr Gbagbo on Monday announced the nationalisation of the Ivory Coast cocoa sector, adding that he would confiscate the stored beans, worth more than $1.7bn, or £1.1bn, at current futures market prices.
The move appeared a sign that sanctions imposed at Mr Gbagbo "are beginning to work", Ms Haque said.
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