Cocoa prices have hit fresh highs on news that rebels have moved into a key producing area in Ivory Coast, source of two-fifths of the world crop.

Over the weekend, the city of Daloa, heart of the country's cocoa belt, reportedly fell after brief resistance from troops loyal to President Laurent Gbagbo.

The fall of Daloa, traders believe, will disrupt delivery of cocoa to Ivorian ports, and may affect up to one-third of the crop.

Fears of yet more supply problems at one point pushed up the price of a tonne of cocoa by £43 to £1,636 - a near 17-year high - on London's futures market.

"I would not be surprised if later this week we go through £1,700 or £1,750 or even £1,800," one trader said.

Disrupted flows

The current supply problem now resides in the fact that, while much of the main producing country is in rebel hands, the government still controls the ports.

Some firms hope that cocoa beans from the west of the country could flow freely again if the rebels captured the port of San Pedro.

But few are willing to bet on any retreat in prices until a ceasefire is negotiated - currently seen as a slim possibility.

The civil war in Ivory Coast came at a time when cocoa prices were already extremely high.

Ivorian cocoa production has fallen from about 1.4 million tonnes in 1998-99 to about 950,000 tonnes last year.