Assignment part 1

Cocoa Beans

If you look at the link given

• Indexmundi (2010) Cocoa Bean Prices – Monthly value

• http://www.indexmundi.com/commodities/?commodity=cocoa-beans&months=60

• It gives a graph – but 2000 to 2010 – not time period asked for

• The data below can be used to create a graph in excel easily (see below)

a) Cocoa Bean Prices – January

2006 to September 2010

Cocoa Bean Prices

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00Ja

n-06

Apr

-06

Jul-0

6

Oct

-06

Jan-

07

Apr

-07

Jul-0

7

Oct

-07

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

Jul-1

0

Series1

Source: Indexmundi (2010) Cocoa Bean Prices – Monthly valuehttp://www.indexmundi.com/commodities/?commodity=cocoa-beans&months=60Accessed 13 October

Title – mustHaveANDDate coveredcorrect

PriceUS $Per Metrictonne

Must have and must beMetric tonnes not value- See question

50 word blurb

• Something like

The diagram shows that with some minor fluctuations (especially in 2008), cocoa prices have risen steadily reaching a peak in January 2010 of $3522.10 per metric tonne. They now appear to be on a downward trend, falling to $2850.17 in September 2010.

(it would be nice to have the figures but not vital)

Producers of cocoa beans

• You were given the following link

• Information on Producers of cocoa beans

• http://www.fao.org/es/ess/top/commodity.html;isessionid=DA3839122F16FDE4E66B7F3156E63DBE?lang=en&item=661&year=2005

b) Producers of Cocoa Beans 2005 MTonnes

Producers of Cocoa Beans 2005 Mtonnes Source: FAO (2010)

http://www.fao.org/es/ess/top/commodity.html;isessionid=DA3839122F16FDE4E66B7F3156E63D

BE?lang=en&item=661&year=2005 Accessed 10 September 2010

1,330,000, 34%

736,000, 19%610,000, 16%

366,000, 9%

213,774, 6%180,000, 5%

5,650, 0%5,630, 0%

5,000, 0%137,178, 4%

55,298, 1%48,405, 1%

42,500, 1%

33,423, 1%32,000, 1% 17,000, 0%

28,500, 1%

11,000, 0%

8,000, 0%8,500, 0%

Cote d'Ivoire Ghana Indonesia Nigeria BrazilCameroon Ecuador Colombia Mexico Papula New GuineaMalaysia Dominican Rep. Peru Venezuela, Bolivar Rep of Siera LeoneTogo India Philippines Congo, Dem Rep of Solomon Islands

Source: FAO (2010) http://www.fao.org/es/ess/top/commodity.html;isessionid=DA3839122F16FDE4E66B7F3156E63DBE?lang=en&item=661&year=2005Accessed 10 September 2010

title

c) Share of main consuming countries 2004-5

Source: UNCTAD (2010)http://www.unctad.org/infocomm/anglais/cocoa/market.htmAccessed 10 September 2010

Consumers of cocoa

• This was given as

• http://www.unctad.org/infocomm/anglais/cocoa/market.htm

• The pie chart was already there.

d) 2 interesting points about the general market shown

above - Suggested good answers – need 2:

• i) Lesser Developed countries produce cocoa and More Developed Countries consume it

• ii) Dominance of a few suppliers should give power

• iii) Dominance of USA and Europe gives consumer power

e) 3 major factors affecting cocoa price recently

1. Increased demand due to increased demand for chocolate in rich countries

2. Reduced supply due to poor crops in west Africa (especially Ivory Coast)

3. Increased demand from speculators – especially Anthony Ward. Note this is a demand factor at present – when he releases the cocoa onto the market it will become increased supply.

4 reasons – Demand and Supply

Increased demand due to increased demandfor chocolate in rich countries

Reduced supplyDrought in Ivory Coast

Cocoa PRICES

Arrows show in which directionThis factor pushes price

DEMANDIncreased demandFrom speculatorsEspecially AnthonyWard

SUPPLYDEMAND

Assignment 1 part 2

Answers

Increased demand due to demand for chocolate in rich countries

Supply

Demand 1

Price

Quantity

P1

Q1

Demand 2

Demand shifts right Price rises to P2Quantity rises to Q2

Q2

P2

Reduced supply due to poor crops in West Africa

Supply 1

Demand

Price

Quantity

Demand 1

P1

Q1Q2

P2

Supply 2

Supply shifts left – Price rises to P2Quantity falls to Q2

Increased speculation

Supply

Demand 1

Price

Quantity

P1

Q1

Demand 2

Demand shifts right Price rises to P2Quantity rises to Q2

Q2

P2

g) Demand Elasticity

• Demand is price INELASTIC DEMAND– People love chocolate and are addicted.

Would need a massive increase in price to stop buying it

– Low proportion of household income – so higher price has little impact

h) Supply Elasticity

• Short run – very price INELASTIC supply• Long run – more price ELASTIC supply• Why – in long run can plant more cocoa trees• Ivory Coast

– Short run - Poor crop due to rains spoiling and cannot replant immediately

– Long run – could plant more but low investment in cocoa industry

– Low prices of cocoa in past have lead to shift to other products – so reduced long term price elasticity of supply

Diagram

• Supply curve should be steep – inelastic in short run

• Demand curve should be steep - inelastic

Diagram

Demand 1

Supply 1

P1

Q1

Demand Curve shifts to D2 forspeculation

Demand 2

Demand Curve shifts to D3 forMore demand for chocolate

Demand 3

Supply curve shifts to S2 For poor crops

S2

Q2

P2

Price rises a lot to P2Quantity rises a bit to Q2

How much price rises Depends ona) Size of shiftsb) Elasticity of D & S Re price

Finally

• Add up the marks on the front• Highlight anything you are unsure about• Give feedback

• When you get it back• Comment in space marked if you disagree with

anything• DO NOT CHANGE ANY MARKS DIRECTLY