• Forbes, Tuesday, December 15, 2009 11 AM

Who would have thought that climate conditions in West Africa might move Cadbury investors to side with Kraft? Parmy Olson ends his story with that question. Let's back up.

Supply problems have partly stemmed from difficult harvests in top cocoa producer Ivory Coast, which produces more than a third of the world's cocoa. Last year too much rainfall led to bad harvests, and this year more drought-like conditions could produce the same outcome.

So far, the October to January cocoa harvest in the African country has been strong, according to Laurent Pipitone, senior statistician at the International Cocoa Organization (ICCO), "but the second part of the main harvest (January to March) is expected to be relatively poor," thanks to the lack of rainfall between August and October of 2009. That will probably also impact the mid-crop harvest, which produces about a quarter of the total harvest for the season and takes place between April and September next year.

What does that mean for Cadbury? Expect the worst and hedge against more price hikes.

Read the whole story at Forbes »