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France's Bittersweet Chocolate Deal

Ivory Coast, which produces more than half the world's cocoa, still suffers from a rebel incursion.
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Consider the case of Ivory Coast, the West African nation that produces more than 50% of the world's cocoa. Last September, a group of rebels organized in and deployed from Liberia to invade its democratic neighbor.

According to Global Witness, a human rights investigative organization, the rebels are mostly made up of non-Ivorian mercenaries and are commanded and armed by "close associates" of Liberia's president, Charles Taylor. Their objective? "Development aspirations," says the Liberian government.

Liberia has "developed" (read: destabilized) the region by supplying mercenaries and weapons, funded by exploiting natural resources. More than 3,000 people have died and 1 million more have been displaced in Ivory Coast since the incursion began. Cocoa, one of West Africa's most valuable resources, appears to be the development aspiration

du jour

for the Liberian government.

The French Connection

In the recent Iraq situation, France refused to participate in liberating the country from one of the worst despots in modern history. But in Ivory Coast, France sent in troops to broker a peace deal in January that gives the out-of-country mercenaries representation in a unity government.

Anyone who follows commodities knows that the cocoa chart reflects the rebel invasion: The chocolate bean has nearly doubled over the past year. The situation is potentially very volatile, but the May daily chart of


(CCK3:NYBOT) does suggest that the French peace deal might work out, if only in the immediate future.

Besides the October 2002 and February 2003 declining peaks, cocoa has a large unfilled gap above 2215. Its recent consolidation shows a pattern of lower highs and declining lows. The past two days also suggest this market will resolve to the downside. The market finished Wednesday at the bottom of its range after striking a three-week high. And Thursday's price action is confirming the prior day's tail with a gap-down move.

Down the road, it appears that Liberia wants -- and may get with the French-sponsored power-sharing arrangement -- access to Ivory Coast's cocoa wealth. It's hard to conceive of a country giving up its source of livelihood without a fight, which would surely disrupt the production, distribution and supply of cocoa. In the meantime, this market looks like it will continue correcting.

Other Markets

Consistent trades below Wednesday's close in May


(HGK3:COMEX) -- below 71.80 -- will trigger this market out of a three-day pull up from the low. Copper could be drawn to the measured move objective down to 70.00. Once there, the market may shift focus away from the SARS epidemic affecting copper demand in Asia and mediocre global economic performance, to the tightening supply situation appearing in London Metal Exchange warehouses.

Last week I

pointed out how May

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(SIK3:COMEX) was diverging from gold and actually moved higher as the yellow metal forged a fresh three-month low. Silver has moved higher every session since that divergence as gold sank down to its December base. Look for silver to continue higher to 4.590. Consider buying dips, especially at the 4.436 level.


(CN3:CBOT) has been in a seven-month slide. The past eight days' price action have left an upside overbalance that indicates the bear market is over in corn and that it's time to consider taking long-side setups. The market is in the first day of a pullback. Look for entry on a retracement to the 239 level or on a trade above the high of the low bar in any three-to-five- day pullback.



(SBK3:NYBOT) set new two-month lows out of its

bearish setup. Look for this market to continue imploding to complete a witch's hat on the chart and to test the up move's original breakout down in the 7.00 area.


live cattle

(LCM3:CME) continues behaving well after pouncing out of a Cooper Rule of Four pattern. A test of contract highs is in order here.

Marc Dupee is an independent trader and co-author of the book

The Best: Conversations With Top Traders. Dupee was formerly markets analyst and futures editor for TradingMarkets Financial Group. At time of publication, he was short cocoa, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback to

Marc Dupee. has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there

Charts are from Qcharts.