Cocoa prices hit a 'record high' - or do they?

The Financial Times reports a sudden increase in the cocoa price, as bad weather and black pod disease lead to lower-than-expected deliveries to ports in Cote d'Ivoire. Good news for cocoa farmers, if the price spike is passed onto them. My concern is, it won't be - the traders will take a profit and the underlying conditions that led to the price spike will return. In the medium term, prices are likely to fall anyway, as global demand for chocolate (and especially high-quality chocolate, such as that coming from Latin America and Ghana) flattens after years of steady increases. (See this from the same paper).

Viewed over the last 15 years, the current price of £1,820 per tonne certainly looks impressive:

















However, the current price may be less impressive than it looks, for two reasons. First, this chart reveals a similar spike in 2002 (presumably a result of the civil war in Côte d'Ivoire) that was followed by a 50% drop in prices and a 5-year slump. That would now equate to a price of around £900. Second, cocoa futures are priced in pounds, but the biggest cocoa producers and consumers use euros. Since the pound's value has declined from around €1.40 a year ago to €1.10 today, a cocoa price of £1,800 today is equivalent to around £1,400 a year ago - namely €2,000. The effective export price in Côte d'Ivoire, whose currency is tied to the euro, is some 10%-15% lower now than in July, when cocoa prices peaked at £1,700 (then €2,200 or $3,000).

In the meantime, what might be the effect of cocoa prices on the second round of Ghana's presidential elections, scheduled for 28 December? Probably very little, since the Cocobod fixed its annual price in August. But with only a percentage point between the two candidates, small psychological factors could make the difference. To all friends in Ghana and friends of Ghana, I wish you a peaceful Christmas and an even more peaceful election.

What to do about Rwanda?

Right now, if you're in development in Britain or America, Rwanda is a good place to be. Please note I'm not talking about economic growth or political stability (though it has both of those), but things like NGO presence, media attention, politicians visiting to show they care. If you have ever read accounts of the Rwandan genocide, or remember those dark days in 1994, Rwanda's peaceful reconstruction is surely something to celebrate. It even has the ultimate capitalist accolade: a business-school case study.

Unfortunately, there is a dark side to Rwanda: its role in the never-ending conflict in Eastern Congo. This disturbing account comes from the New York Times. Notice that the Rwandan officials do not deny that Rwandan citizens are crossing into DRC to fight, merely that their government is encouraging or paying them. But then who needs pay when mineral riches await?

I know very little about Congo and would not dare to take sides or argue that Rwanda's fears about Hutu extremists hiting in the jungle are unjustified. But I still feel wary about a country celebrated as a model of enlightended leadership in a troubled region intervening in its neighbour's affairs militarily. Yes, Congo is a threat to regional stability; yes, the Congolese government has failed to gain control of Eastern Congo or disarm the Hutu militia; but that is still not a pretext for unilateral military intervention, even by proxy. (As this guy, or this one, could tell their Rwandan friends).

It may suit Western governments to continue supporting President Kagame's regime (except for France); it may well be the best regime for Rwandans as well. But let's not allow the West's failure to prevent the Rwandan genocide become a pretext for inaction in the Congo, or get caught up in some stupid neo-colonial rivalry. We need a united approach and we need it now.