Cocoa Addendum

As mentioned in the previous post on Cocoa and its Implied Volatility, I said that I perceived the risks to be on the upside (for option writers). Well here is one view from Optimus Futures that lends a bit of weight to that hypothesis.

Cocoa: Trouble in Cote d’Ivoire and Ghana

Political problems have plagued West Africa including the Cote d’Ivoire and Ghana for years now. Cocoa producers in these two major producing countries (60% of world production combined) also have to contend with diseases to their crops, namely the swollen shoot virus. This virus defoliates and can potentially kill cocoa trees in many parts of West Africa. According to a BBC News report on October 13, 2006, some cocoa plantations have been abandoned as the virus continues to spread. The increasing costs of fertilizers (derived from petroleum) and the high cost of anti-virus sprays combined with low prices for cocoa on the open market have made it difficult for farmers to maintain their crops. ===>>More<<===

While this news doesn't appear to be a new revelation, it's worth keeping in mind.