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Cocoa market on fire in U.K.

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Scott Jagow: Most prices are falling in this economy — except this one: The price of cocoa. We’re joined by our man in London, Stephen Beard. Stephen, how expensive is it?

It’s at its highest in London for 23 years. My favorite quote of the morning: “Cocoa is on fire!” says one analyst. There hasn’t been this much excitement in the London cocoa market, Scott, for quite a few years, since somebody actually tried to corner the cocoa market a few years ago — someone who was inevitably dubbed “Chocfinger” by the press. So it’s looking very buoyant, not to say frothy, here in London.

Jagow: OK, so why is it going up?

Beard: Part of it is to do with the fact that there’s a huge market in London, and cocoa is priced unusually here in London — not in U.S. dollars, but in British pounds, and the British pound is weak. But beyond that, the biggest story is supply and demand. Supplies are pretty tight. Cocoa production in Africa has been falling, heavy rainfall apparently in West Africa has cut output. There’s been an increased incidence of the dreaded Black Pod disease. And, of course, there’s been concerned too about political unrest and upheaval in West Africa, which has raised fears about future supply.

Jagow: And what about the demand for cocoa?

Beard: Well this is interesting, too — demand is holding up. Unlike many other commodities in a downturn. And it comes down to this whole point about comfort food. People need their steaming, hot mug of cocoa at bedtime, or they need their chocolate bars to keep their spirits up throughout the misery of the recession.

Jagow: All right, Stephen Beard in London. Thanks.

Beard: OK, Scott.

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