Case scenario 3 - If Ivory lug-DESI UBSPIIE UHEETIHIHIY Int...

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Unformatted text preview: If": Ivory lug-DESI: UBSPIIE UHEETIHIHIY, Int} DWEBIEEI F'IEICE Dr'l carcn ocoa is a powder made from cacao seeds after they have been fermented, roasted, shelled, ground, and freed of most of the fat.T3 It is the main ingredient used to make choco late. The Ivory Coast, located in West Africa, is the world's largest producer of cocoa, and a global supplier of one-third of all cocoa,“ valued at $3.9 billion {at current prices)?” Cocoa exports make up almost one-third of the Ivory Coast’s gross domestic product.“ Factors affecting supply and demand of cocoa—and subsequently, its price—include weather condi- tions, chocolate consumption, underinvesttnent in cocoa fann— ing due to high taxes and more lucrative crops, political issues (leading to an export ban}, and investor speculation. Cocoa farming in the Ivory Coast has suffered from weather conditions—as in too little rain, or a drought, which has caused a shortage. As the economy has improved, demand for cocoa by confectioners or candy makers has increased, and with a shortage a price increase usually results. In the Ivory Coast, cocoa has suffered from chronic underinvestment and high taxes, with many farmers switching to the more lucrative trade in rubber.32 Without new planting, trees can reach their peak of productivity and this can affect production. The impact of investment and taxes on a country‘s crop and main export can be dramatic for a country like the Ivory Coast, relying on nrrrhtliirrl nF its: an]: Frnrn tl-IF, owls, nF Pmna nurrrnric When a ban is imposed on a commodity, it causes unrest for the exporting country and its growers. Those in need of the commodity—for example, large confection companies—may end up sourcing cocoa from other countries}5 The biggest support of prices of any commodity is based on fear of supply constraint. As the supply goes down, prices increase and investors begin speculating. Speculation occurs when, in an effort to make a buck, investors turn to a hi gher-risk commodity, with hopes of an upward price shift. The effect of the political unrest is that cocoa prices jumped on the global commodity markets to levels not seen since the late 19Tfls, sending shockwaves throughout the cocoa-processing indus- try?“ As these many factors continue to have an impact on the supply and price of cocoa, what impact will they have at the vending machine when you’re craving a tasty chocolate treat? What's Your Take? 1. When export bans are put in place, what do you think might happen to companies like Mars, makers of M&M’s, Snickers, T‘wix, Dove, and Three Musketeers? 2. Free markets depend on demand from buyers and supply from sellers to reach a market price for a good or service. "nut rlr'r ‘Ll'fill intnrnrpt H13: ctntflmrflnt with rrlorsrrrl tn ant-ml n’F the IV”? Ceast carne 1'” a standstill “fl“ a presidential “WHO" 3. When the price fer cecea increases, can it always be at- where the winner called fer an expert ban ef the cemmedit).r te [fibmgd m s Shunflgfl Uf “mg Pmiflus baans? Explain. “squeeze the purse strings ef the incumbent whe had refused te step down (the disagreement was ever alleged veting fraud in the nerthern part ef the ceuntry), after he lest."53 Beth used cecea as a bargaining chip and tactic te threaten the ether. As a result ef this ban, prices were driven up by futures inves— 4. If yeu leek a pell, and assumed a dreught in the Iver},J Ceast leading te a cecea shertage, what is die maximum year friends weultl be willing te pay fer a candy bar beferc cheesing a substitute? What weuld the substitute be? [era hepiug be make rnency en the cemmedity under pelitical 5- If 3"?” knew “13‘ mere cecea i5 required ffll‘ “1E predec— turmeil. The expert ban dreve cecea futures higher. The ban "D” “f diff“ Chflmlfllfia 35 H Cflfldfi' mflkfifi what W011” 3'0“ caused meea beans in pilc Up in 11.:st Ceast wareheuses, csus- research In Imus af cansumsr preferences and tastes? ing transpertatieu bettleuecks when shipments resumed.“ ...
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  • Summer '16
  • Dr. Babajide Osatuyi

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