The world cocoa situation fell into further disarray the past couple of weeks due to worsening political and economic conditions in top-producing Ivory Coast, which remains locked in a presidential power struggle.

What began as hope last fall when the West African nation held a much sought but often delayed presidential election for the first time in 10 years has turned into a debacle as incumbent president Laurent Gbagbo has refused to leave office after Alassane Ouattara won a Nov. 28, 2010, run-off election that has since been certified by the United Nations. Mr. Gbagbo still controls the military and the courts, among other things. Mr. Ouattara has set up his government under the protection of U.N. troops.

Mr. Ouattara in late January imposed an export ban on cocoa (beans and products) and coffee, the Ivory Coast’s major cash crops, in an attempt to squeeze Mr. Gbagbo’s finances. Several nations, including the United States, and major cocoa processors honored the export ban. The European Union, which sources much of its cocoa beans and products from the Ivory Coast, and other nations imposed economic sanctions, which include shipments of food into the country as well as exports out. In February most foreign banks there closed, which in effect ground the nation’s economy to a halt. There have been several rounds of deadly clashes between the two factions.

Early last week Mr. Ouattara extended the cocoa and coffee export ban to mid-March, which sent cocoa bean futures prices in New York to 32-year highs, above $3,600 a tonne in nearby contracts. In London cocoa bean futures were the highest since July 2010, when prices hit 33-year highs. Futures prices pulled back only modestly on profit taking as the week progressed.

While the loss of life and growing lack of food in the Ivory Coast clearly overshadow concerns of the cocoa market, the latter is in a quandary but not yet in dire straits. The West African nation was forecast to produce 1.3 million tonnes of cocoa beans in 2010-11, which began Oct. 1, 2010. The main crop harvest is basically completed, although an estimated 300,000 tonnes of cocoa beans remain on farms or in port warehouses, unable to be moved because of the export ban. How much of that supply will be lost due to spoilage is unknown. Meanwhile, it is estimated fairly large quantities were being smuggled out of the Ivory Coast for processing or export from surrounding countries. Mr. Gbagbo was said to have released a list of companies involved in the smuggling, most of which were regional West African or European. Major U.S. cocoa processors earlier indicated they would honor the export ban.

Also of concern is harvest of the much smaller mid crop, which usually occurs in April-May. With banks currently closed, it would be difficult for farmers to be paid, and thus delivery of the mid crop may be in jeopardy, as would many farmers’ only source of income.

The timing of the Ivory Coast ban comes during the chocolate industry’s most active period leading up to Easter. Other than on futures prices, the impact so far has been minimal, especially in the United States, which sources some of its cocoa beans and products from the Ivory Coast, but also gets substantial amounts from other West African nations, Indonesia and Brazil, among some others. Even in Europe, which has higher per-capita chocolate consumption and takes much of the Ivory Coast crop, it appears processors had adequate supply in storage ahead of the ban, although last week some in Germany indicated their supplies would not hold out “indefinitely.”

Traders also are wary of what might happen to prices if the situation is resolved soon and some form of normalcy returns to the market. Most expect futures prices would plummet since there is no real shortage of cocoa in the world.

Most of the trade appears more prepared for a prolonged struggle in the Ivory Coast and the potential for tightening cocoa bean and product supplies, at a time when cocoa powder prices already are at historic highs. Prices last week in the U.S. market edged up 1c a lb, to $2.30@2.40 for basic 10% to 12% natural. Higher quality black cocoa powder was said to have traded as high as $3 a lb, which was above the quoted range of $2.80@2.90 last week.

The Sosland Publishing “chocolate bar index” last week stood at 216.1 of the March 2005 base of 100. Although prices of sugar (also historically high), dairy products and other ingredients also contribute, the index was at a record high.

Several companies have raised or published intentions to raise chocolate and chocolate candy prices. Those increases, though, may reflect the ongoing strength in the cocoa powder market as much as the current situation in the Ivory Coast, which provided an opportunity to better cover ingredient costs.