Why Are Cocoa Prices Rising
1 UNIVERSITY OF HOUSTON – VICTORIA SCHOOL OF BUSINESS ADMINISTRATION
ECO 6351 ECONOMICS FOR MANAGERS / SECTION Cinco Ranch
INDIVIDUAL CASE ANALYSIS: WHY ARE COCOA PRICES RISING?
INSTRUCTOR: Dr. Vera Adamchik STUDENT: _____Hassan Cherradi______
I, ________Hassan Cherradi______________, hereby certify and warrant: (a) that this Individual Case Analysis is my original work; (b) that I have acknowledged all the sources used in this Case. I understand that copying of another’s work and representing it as my own work is a serious academic offense, and should be treated as such.
April 2009
2 Causes and Analysis of Rising Cocoa Beans Prices Prices for cocoa mainly respond to supply and demand factors. Ideally, one would think that during boom periods, there would be a supply surplus that would result prices to decline. Consequently, farmers would want to switch to grow other crops that may be more profitable, creating then a short in supply that would bring prices up again. However, they are other determinants that can impact the market supply or market demand of cocoa and move the equilibrium between demand and supply. Some of the main causes that result in a price increase of cocoa are explained as below. Diseases and Pests Crop-damaging or threatening pests and diseases can lead to a decline in cocoa supplies and, therefore, make cocoa price shoot up. As published by the on-line source of OARDC (The Ohio Agricultural Research & Development Center), there are different species of insect pests that can afflict cocoa crops. In the major cocoa-growing areas of the world, the most serious ones are known as capsids or mirids. However, a new insect pest known as the cocoa pod bearer has emerged recently in some of the countries of South Asia and proved to be tenacious. As far as diseases, the black pod disease remains to be the most popular. The following couple of real situations show how cocoa crop damage or threat by pests or diseases can impact its
ECO 6351 ECONOMICS FOR MANAGERS / SECTION Cinco Ranch
INDIVIDUAL CASE ANALYSIS: WHY ARE COCOA PRICES RISING?
INSTRUCTOR: Dr. Vera Adamchik STUDENT: _____Hassan Cherradi______
I, ________Hassan Cherradi______________, hereby certify and warrant: (a) that this Individual Case Analysis is my original work; (b) that I have acknowledged all the sources used in this Case. I understand that copying of another’s work and representing it as my own work is a serious academic offense, and should be treated as such.
April 2009
2 Causes and Analysis of Rising Cocoa Beans Prices Prices for cocoa mainly respond to supply and demand factors. Ideally, one would think that during boom periods, there would be a supply surplus that would result prices to decline. Consequently, farmers would want to switch to grow other crops that may be more profitable, creating then a short in supply that would bring prices up again. However, they are other determinants that can impact the market supply or market demand of cocoa and move the equilibrium between demand and supply. Some of the main causes that result in a price increase of cocoa are explained as below. Diseases and Pests Crop-damaging or threatening pests and diseases can lead to a decline in cocoa supplies and, therefore, make cocoa price shoot up. As published by the on-line source of OARDC (The Ohio Agricultural Research & Development Center), there are different species of insect pests that can afflict cocoa crops. In the major cocoa-growing areas of the world, the most serious ones are known as capsids or mirids. However, a new insect pest known as the cocoa pod bearer has emerged recently in some of the countries of South Asia and proved to be tenacious. As far as diseases, the black pod disease remains to be the most popular. The following couple of real situations show how cocoa crop damage or threat by pests or diseases can impact its
References: Campos, O. V. (2008, July 3). Chocolate maker urges farmers to plant more cocoa. Manila Standard. Cocoa integrated pest management homepage. The Ohio Agricultural Research and Development Center. Retrieved April 18, 2009 from http://www.oardc.ohiostate.edu/cocoa/ Cocoa market. Retrieved April 2, 2009 from http://www.futurespress.com/ Cocoa price shoots up following West Africa supply concerns. (2009, January 30). Ghana Business News. Retrieved April 16, 2009 from http://ghanabusinesnews.com/2009/01/30 Cui, C. (2009, February 13). Cocoa prices create chocolate dilemma. The Wall Street Journal, p. C.1. Henschen, H. (2008, December 16). Demand boosts cocoa prices. The Wall Street Journal, 252(142), p. C6. Luciw, R. (2008, February 15). Cocoa futures extend rally. The Globe and Mail (Canada), Report on Business: Globe Investor Markets; Commodities, p. B11. Partos, L. (2008, October 02). Ivory Coast cocoa hit by disease, politics. Confectionery News. Retrieved April 16, 2009 from http://confectionerynews.com/The-Big-Picture Rossingh, D. (2007, July 2). Cocoa climbs on unrest. The International Herald Tribune, p. 15. Cocoa prices soar on Ivory unrest. (2004, November 8). BBC News. Retrieved April 16, 2009 from http://news.bbc.co.uk/2/hi/business/3991939.stm Siddiqi, M. (2008, March). Prices remain firm for softs. African Business,340,40-43. Strike hits Nigerian cocoa. (2007, June 26). Lloyd’s List, Market, p. 19. 8 Appendix Figure 1 Figure 2 Figure 3 9