Cocoa buyers move to calm market

26 January 2011
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26 January 2011 | Lindsay Clark

Cocoa buyers have reassured the market that disruption to supply chains caused by the Ivory Coast’s export ban would be kept to a minimum.

CIPS CEO David Noble said that most supply chains should be robust and flexible enough to cope with these conditions in the short term as businesses are becoming more aware that developing risk strategies to cope with unforeseen events, such as last year's volcanic ash, is becoming crucial.

The Ivory Coast, which produces about 40 per cent of the world’s cocoa, the essential ingredient for chocolate, has been banned from exporting the commodity for a month because of a power struggle in government. The president, Laurent Gbagbo, has clung to power despite losing an election, while president-elect, Alassane Ouattara, has issued the export ban to bring international attention to disputed vote.

“The longer there is instability, the worse things will be,” Noble warned. “This is particularly the case for smaller businesses at the mercy of market forces, which purchase smaller quantities of stock at higher frequencies. They may also have fewer resources to create mitigation strategies for every possible eventuality.”

Noble said a recent study had shown that half of business respondents in the UK had no formal methods at all of identifying supply chain risk.

“Efficient supply chain design works well when the environment is stable and predictable but the vulnerabilities are clearly on show when the environment becomes volatile and uncertain,” Noble said. “With rocketing food prices, those vulnerabilities may soon become commonplace."

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