The cost of cocoa butter relative to the price of beans rose this week in Europe as processors are still curbing bean grinding, according to three traders with direct knowledge of the sales.
The ratio was 1.55 to 1.62 times the price of cocoa futures on NYSE Liffe in London, said the traders, who declined to be identified because they aren’t authorized to speak to the media. It was 1.5 to 1.52 last week, when a four-month rally stalled. Cocoa butter accounts for as much as 20 percent of the weight of a chocolate bar. The beans also yield cocoa powder, used to make ice cream, cookies and soft drinks.
“Cocoa butter is actually getting quite tight now, as grinders have not been producing much butter in the first half of 2012,” Kona Haque, a London-based analyst at Macquarie Group Ltd., said in a report e-mailed on Sept. 4.
Ratios began rallying in May after grinders started buying the product to slow bean processing. The ratio was at 1.06 on May 25, according to data from KnowledgeCharts, a unit of Commodities Risk Analysis, a research company in Bethlehem, Pennsylvania. Euromar Commodities GmbH slowed grindings at its factory in Fehrbellin, Germany, this year and Delfi Cocoa (Europe) GmbH started to renovate its plant in Hamburg July 1.
European cocoa processing may drop 15 percent in the third quarter, according to the average of 10 trader estimates in a Bloomberg survey published last month. Factories slowed grinding because powder prices started to fall. Powder in Europe cost 3,043 euros ($3,845) a ton on Aug. 31, 1.3 percent less than a week earlier, KnowledgeCharts data showed.
Cocoa futures climbed 7.1 percent in London last week. The price rose 0.4 percent to 1,741 pounds ($2,783) a ton by 1:49 p.m.
“With butter stocks now finally falling and grindings expected to remain slow in the third quarter, there is a real risk that butter will turn from surplus to shortage,” Haque said.