Ghana's cocoa farmers look set to benefit from ongoing political turmoil in neighboring Ivory Coast, as supply disruptions boost world prices and increase demand for Ghanaian beans.

Cocoa markets rallied to four-month highs Tuesday, hitting GBP2,081 a metric ton on the March contract in London and a high of $3,140/ton in New York, as dealers feared an ongoing impasse between rival presidential candidates could spill into widespread violence in the world's top cocoa producer.

But prices turned to end the day lower after Ghana's state cocoa agency, Cocobod, offered 3,000 lots to the market, traders told Dow Jones Newswires.

"That put a dampener on prices," said a trader.

Prices have gained as dealers fear a return to civil war in the Ivory Coast. Last month's election was supposed to end a decade of instability in the west African country but has descended into a potentially explosive standoff that has disrupted the economy.

Analysts say they expect Ghana's producers to cash in on any further unrest.

"Any short-term supply disruptions in the Ivory Coast will help boost demand for Ghanaian cocoa as consumers switch to more readily available/reliable sources," said Kona Haque, a commodities analyst at Macquarie.

Ghana has emerged as the world's number two cocoa supplier in recent years after a push by the government to boost cultivation of the cash-crop. In an interview with Reuters, Cocobod's deputy director said he expects 2010-11 output to exceed the previous forecast of 700,000 metric tons due to clement weather and improving husbandry techniques, such as higher fertilizer application.

Much of the improvement is down to increased investment in the sector. Cocobod increased the size of its financing facility to $1.5 billion from $1.2 billion, using the extra cash to improve farming techniques and raise the state-set cocoa price 33%, taking it to the equivalent of $2,246/ton.

Gary Mead, an analyst with VM Group, said despite steps by the government to combat smuggling between the neighboring countries, there is already evidence that Ivory Coast farmers are moving beans into Ghana.

"Ghana raised its fixed price at the start of the 2010-2011 season in October and it's been at a premium to the free-floating price that farmers can get in [the Ivory Coast]," he said. "If farmers/middlemen can't get their cocoa out via Ivory Coast, there will be an additional incentive to try to market it via Ghana."