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December 30, 2010

Cocoa prices rise after Ivory Coast election turmoil

by Alex Hawkes

Cocoa prices have risen by almost 10% in the last few weeks due to the unrest in Ivory Coast, and could rise further, an analyst said yesterday.

Cocoa futures – contracts promising delivery of cocoa in May – at the Intercontinental Exchange stood at $2,758/tonne (£1,796) at the beginning of this month, rising as high as $2,994/tonne in trading on December 21.

Ivory Coast is the world's largest producer of cocoa and produces more than a third of global supply, meaning that any restriction in its supply will drive up prices.

Carsten Fritsch, a cocoa analyst at Commerzbank, said that he expected the price of the commodity to rise further.

"We think that markets still underestimate the supply risk regarding Ivory Coast," Fritsch said.

Any significant increase is likely to have an impact on chocolate prices, though there are other factors that might mitigate any increase such as competition in the market and the costs of other key ingredients.

The price rises in such a key commodity come at a time when British manufacturers are already increasing the price of chocolate bars ahead of the VAT increase to 20% on 4 January.

Cadbury and Nestlé have recently pushed up the recommended retail price of top-selling confectionery in the UK such as Dairy Milk, Wispa, Kit Kat and Yorkie by up to 7% – more than double the rate of inflation.

Guardian

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