Cocoa Processing in Asia Falling on Surging Bean Prices

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Cocoa grinding in Asia probably dropped 11 percent in the second quarter as surging prices hurt demand for the beans used in making chocolates.

Processing fell to 143,500 metric tons in the three months ended June 30 from 161,805 tons a year earlier, the median of 10 analyst and trader estimates compiled by Bloomberg showed. Forecasts ranged from declines of 8 percent to 15 percent. The Cocoa Association of Asia will release data on Friday, with figures from Indonesia, Malaysia and Singapore.

Prices climbed 13 percent in New York this year, after three annual increases, amid concern dry weather may cut supplies from Ghana, the biggest producer after Ivory Coast. The gains are in contrast to losses in most commodities including sugar and coffee and may hurt chocolate makers’ margins. Chocolate confectionery sales fell 2.1 percent worldwide from September to April and declined 1.5 percent in Asia, Barry Callebaut AG said July 8, citing data from Nielsen.

“Cocoa was the last man standing in the commodity space,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “The high price level will dampen demand,” he said by e-mail on Wednesday.

Hershey Co., the maker of Reese’s, Twizzlers and Almond Joy candies, cut its profit forecast last month after struggling with slowing growth in China. Grinding generates butter, which accounts for about 20 percent of a chocolate bar’s weight, and powder, used in ice cream and cookies.

Grinding Slowdown

Processing in North America was down 8.6 percent, the National Confectioners Association said on July 16. Malaysian grinds slumped 30 percent, the country’s cocoa board said on July 13. Grinding in Europe climbed 0.6 percent in the second quarter, the European Cocoa Association said July 14.

“While European demand figures surprised to the upside earlier this month, we remain convinced that a deeper global slowdown in cocoa grindings growth is unfolding,” Citigroup Inc. analysts including Aakash Doshi and Edward L. Morse wrote in a note dated July 20. The slowdown will be “spurred by high cocoa and butter prices in recent years and underwhelming economic growth in key consumer blocs,” they said.

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