Hackett Advisors in the News

By Claudia Carpenter and Pauline Bax - Jan 24, 2011 12:50 AM ET

Ivorian Export Ban May Drive Up Cocoa Prices 10%, Hackett Financial Says

Cocoa prices may advance by as much as 10 percent after the president-elect of Ivory Coast, the world’s largest producer, banned exports for a month, according to Hackett Financial Advisors Inc.

Alassane Ouattara, the internationally recognized winner of the Nov. 28 presidential election, suspended all cocoa and coffee exports from today to cut off funds to incumbent President Laurent Gbagbo. The country’s main exporters agreed to the ban, Malick Tohé, an adviser to Ouattara’s government, said by phone from Abidjan yesterday.

Cocoa, used in chocolate, has climbed about 14 percent since the elections on concern that unrest would disrupt supply. Futures gains may help stoke global inflation after food prices increased 25 percent last year and the poorest nations paid as much as 20 percent more for imports, according to the United Nations. The country’s production is valued at about $3.8 billion at current prices, Bloomberg calculations show.

“I can see the speculators seeing this as a potential to make a quick profit in an extremely bullish environment in commodities,” Shawn Hackett, president of Hackett Financial Advisors in Boynton Beach, Florida, said by phone yesterday. “It might spike to the old high of $3,510,” a 30-year peak reached in December 2009, he said.

Hedge Funds

Prices closed at $3,184 a metric ton on ICE Futures U.S. in New York last week. Speculators including hedge funds increased their net-long position, or bets on higher prices, in New York cocoa futures in the week ended Jan. 18, according to U.S. Commodity Futures Trading Commission data.

Gbagbo, who was declared winner by the country’s Constitutional Council, refuses to recognize Ouattara as the winner of the vote. Ouattara is being protected by United Nations troops at the Golf Hotel in Abidjan. The UN Security Council authorized 2,000 more peacekeepers to the West African nation on Jan. 19.

The disputed election triggered violence that has seen at least 260 people killed, according to the United Nations. Consumer prices jumped, construction stopped and shops emptied as people limited spending.

Investors may begin to price in the risk that the political turmoil will remain unresolved and prompt an extension of the ban beyond one month, Ker Chung Yang, an analyst at Phillip Futures Pte., said by phone from Singapore today, as he predicted prices will advance to $3,400 a ton.

“The export ban will likely set the tone for cocoa prices,” Ker said. “There’s no sign that the political turmoil will be resolved soon. These are the political risks that investors may want to look at.”

Japan, Ghana

Ghana is the main origin of Japan’s cocoa-bean imports, according to the Chocolate & Cocoa Association of Japan. Fujiya Co., a Tokyo-based confectionery maker, sees little impact from the halt, spokeswoman Yukiko Yoshioka said today by telephone.

“The beans can be easily replaced” with other origins, she said. The company has a contract with trading companies to buy beans and has enough inventories in the short term, she said.

Ivory Coast’s cocoa production represents a third of global supply, and is forecast to expand 1.9 percent this year, according to Macquarie Group Ltd. Shipments by farmers to the country’s ports from the latest harvest are about 2 percent below last season, the bank said Jan. 19.

Hackett specializes in trading agriculture commodities and manages $20 million. “I don’t think they can afford to not sell cocoa for too long,” he said.

Cocoa generates more than a quarter of the country’s export earnings. On Jan. 15, the European Union imposed sanctions to block trade between the EU and Ivory Coast.

The Professional Group of Ivory Coast Coffee and Cocoa Exporters was not available for comment when called by Bloomberg News yesterday.


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