Why Are Cocoa Prices Rising

3015 WordsApr 19, 201113 Pages
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…show more content…
Furthermore, forecasts of unreasonable weather can raise fears that crops would be damaged and that production would fall. Such forecasts can also result in pushing cocoa prices to go up. For instance, it is not uncommon that because of the frequent dry weather that hit West Africa in past years, speculations of re-occurrence of another weather dry seasons would persist. Rossingh (2007) reported the following: Drier than usual winds this year in West Africa, where 70 percent of all cocoa beans are grown, prompted the International Cocoa Organization in London last month to increase its forecast for a global supply shortfall this year. Global production will drop 7.5 percent to 3.44 million tons while demand will rise 1.7 percent to 3.55 million tons, the group said May 31. (p.15) Similarly, unfavourable weather is an underlying determinant of cocoa’s market supply. Unfavourable weather will cause a slow and cut down of production of cocoa crops, reduce the available supply of cocoa in the market and cause the entire supply curve to shift leftward, resulting in a spike in cocoa prices at smaller quantities in the market. Political Instability, Civil Unrest or Strikes Political unrest also contributes to the cocoa price equation. Ivory Coast, the global leading supplier of cocoa beans, can be drawn as a good example of how political
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