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Posted on August 19th, 2012, by

This work is about the way how political unrest shifts the supply curve. For the example I take the Ivory Coast cocoa industry and in the paragraphs below main aspects will be revealed.

Cocoa industry occupies much world market part, because cocoa beans are the main raw material to manufacture chocolate and all sweetnesses which are connected with it (candies, nuts in a chocolate, chocolate biscuits etc.) For instance, cocoa beans are used for the making cocoa powder and cocoa butter, and, of course, cocoa drinks are made of cocoa beans. Moreover, nowadays cocoa beans also used as a component of different cosmetic products.

Now the most popular and the often used word is a crisis. Global financial crisis has affected all spheres of our life. Industry companies are looking for the way how to outlive in this hard times. Financial crisis hits cocoa industry too and I’ll try to describe it’s influence.

Crisis has caused the global changes for itself in the world’s economic level; moreover, cocoa prices depend from the economic situation in the world.

This global crisis situation disturbed the world’s cocoa exporters and they have developed a plan how to fight with situation and to help own cocoa companies to hold their positions. New sustainability principles and goals were announced by The World Cocoa Foundation (WCF They are directed to help world’s cocoa farmers and were adopted by the more than 50 organization from all around the world. These principles were not designed in one day, it was the result of last two years discussions among the members of different organizations, producing country governments, and program partners. The main aims of this several years work are to help manage economic and social development, to guide industry efforts and prioritize development projects.

Let’s stopped at these principles and aims which were adopted. They are:

ü  Profit: Advanced and more equitable economic returns for farmers, which will be built upon expanding entrepreneurial skills, better and more effective farmer associations, and more productive, profitable farming practices.

It will helps people to get worthy profit for their work  and promotes improvement of a living level.

ü  People: Healthy and  prosperous cocoa-farming households and communities, where , international labour standards are followed, and farming practices are safe, where children can enjoy their childhood and go to school.

There is an awful situation connected with the children. This chocolate industry allow the usage of child labour to farm cocoa, chocolate’s raw product. Children don’t go to school and forced to work on farms. Some children are sold as child slaves, but most are put to work to help their families, because cocoa farmers are too poor to hire adult workers.

ü Planet: Soil and water should be conserved by the limitation usage of agricultural chemicals, and the fragile tropical ecosystem will be  protected in such a way. And these actions will be the part of  responsible, sound environmental stewardship in cocoa-farming communities

Sona Ebai, Secretary General of the Cocoa Producers’ Alliance in commenting on the above principles, said, It’s critically important that the chocolate and cocoa industry share not only the good work it’s doing to help cocoa farmers today, but to state what its sustainability objectives are over the longer term. We know it will take time to improve the wellbeing of nearly 5-million cocoa-farming households around the world. The important thing at this stage is that we have a clear vision of what we’re trying to achieve and marshal all our efforts toward this end (WCF

Ivory Coast is a major agricultural producer and the world leader in cocoa exports. It is interest to note that cocoa is the Ivory Coast mineral resource. Experts believed that investors should put their money into cocoa. Traders say that cocoa supplies are looking more certain in this global crisis times and demand is holding up well. These words are connected with the other raw material situation, for example, such as industrial metals and oil, whose prices sharply fall, since economic growth fizzled.

In 1960 cocoa plantations were the territory of prosperity; it was after Ivory Coast won independence from France. From the 1960 till our days passed a lot of time and Ivory Coast become the world’s biggest cocoa industry. These years of cocoa prosperity made the nation’s self-confidence. Global financial crisis prognoses the dark future for all industries and cocoa industry is not an exception. By the last information Ivory Coast delivers 40% of the world’s cocoa, but the cocoa prices are changed and these changes reflected on future situation.

Analyzing the effect of unrest in the Ivory Coast on the price of cocoa let’s look at the London prices and understand that cocoa prices jumped by almost 70% last year to reach 23-year highs last month at £1,820 a tonne, buoyed by concerns about supply and the weakness of sterling. Moreover, cocoa prices in New York, denominated in dollars. As we know dollar rose by more than 30% last year. Experts, with cautiosly, say that Ivory Coast’s cocoa activity belt could rebound. Due to this problem analysts argue this year’s poor harvest could mark the start of a drawn-out decline that will boost cocoa prices for years to come. Also, according to World Bank economists a complete collapse of the sector cannot be ruled out if there is no action.

Poor harvest prognoses to take a place in this season and it will be a first warning  of what lies ahead for the world’s cocoa market. Taking January for the analyze it obviously that bean arrivals until this month were the lowest in years, according to data from Abidjan’s Bourse du Café et du Cacao. Statistic information state that only 530,000 tonnes have turned up from the country’s main harvest, which started in October, down more than 35% from about 835,000 in the same period last year. Mid-March was the harvest ends.

Today farmers faced to a big amount of problems, while last prognoses of the industry’s demise and of permanently higher cocoa prices have proved premature. The main problems of this sector are world’s most heavily taxed cocoa growers, impossibility to hire people and no money for incentive to buy fertilizer or to replant.

Only about 35-40% of international prices Ivory Coast’s cocoa farmers receive, compared with about 75-90% for rival producers. Different diseases also ravaged cocoa farms and it is only a part of problems which disturbed Ivory Coast cocoa industry. Due to crisis prices are different and many growers in Ivory Coast have switched from cocoa to rubber, further reducing output, as they seek higher returns.

Fortis Bank says that without observable better husbandry and investment, it is doubtful the country’s output can be produced at much more than 1 tonnes per year; a level that could eventually become very supportive for prices. François Ruf, researcher at France’s Cirad tropical agriculture institute, prognoses that there is a real risk output will steadily fall: I would not be surprised if within a few years, Ivory Coast was producing [only] 500,000-600,000 tonnes of cocoa. According to such   scenario, London-based traders fear that cocoa prices could shoot up to more than £2,000 a tonne. In such a way the cocoa sector is living in a hand-to-mouth, season-by-season manner, says Fortis Bank.

In conclusion I’d like to say that last year prosperity Ivory Coast cocoa industry now tried to survive and think about the solving of the new appeared problems.

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