Cocoa Butter Falls as Chocolate Makers End Christmas Buying

Cocoa butter costs are declining as demand to make chocolates for year-end holidays ended, according to three traders familiar with the sales.

The so-called butter ratio is 2.6 to 2.7 times the price of cocoa futures on NYSE Liffe for delivery in the first three months of next year, said the traders, who asked not to be identified because they aren’t authorized to speak to the media. The ratio on Sept. 27 rose to 2.74, the highest since 2008, according to KnowledgeCharts, a unit of cocoa researcher Commodities Risk Analysis in Bethlehem, Pennsylvania.

Chocolate manufacturers slowed purchases waiting for lower prices before a pick-up in demand for Easter in April, the traders said. Processing of beans in Europe is historically the highest in the fourth quarter for Halloween and Christmas holidays, according to data from the European Cocoa Assocation.

Cocoa beans yield butter, which accounts for about 20 percent of the weight of a chocolate bar, and powder, used to make soft drinks and ice-cream. Butter costs gained as demand improved in developed markets. Bean processing in Europe rose 4.7 percent in the third quarter from a year earlier, data from the Brussels-based ECA showed. Grindings fell 16 percent in the third quarter of 2012, according to the industry group.

Global chocolate sales will climb 6.2 percent to a record $117 billion next year, estimates Euromonitor International Ltd., a consumer research company in London. Chocolate prices will probably rise this Christmas because of higher cocoa butter and sugar costs, according to Francisco Redruello, a senior food analyst at Euromonitor.

Cocoa prices gained 18 percent in London this year as demand is set to outpace supply by 173,000 tons in the season started this month, according to Macquarie Group Ltd. Raw sugar rallied 11 percent last month, the biggest gain since 2011.

Cocoa futures for delivery in March fell 0.2 percent to 1,699 pounds ($2,755) a ton by 9:49 a.m. on NYSE Liffe in London.

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