European Cocoa Grinding Seen Rising for 1st Time Since 2011

Cocoa processing in Europe, the biggest consuming region, probably rose for the first time in more than a year as some processors expanded after a slowdown.

The so-called grind, an indication of demand, rose 8.3 percent in the second quarter from a year earlier, according to the mean estimate of 10 traders, brokers and processors surveyed by Bloomberg. That would be the first gain since the fourth quarter of 2011. Bean processing fell 18 percent from April to June last year, data from the European Cocoa Association showed. The Brussels-based industry group will report figures for the second quarter on July 15.

Delfi Cocoa (Europe) GmbH was operating its factory in Hamburg “closer to full capacity,” Karel Menu, the company’s managing director, said in May. The plant had slowed processing in the second half of last year. While some companies curbed processing in 2012 because of excess cocoa butter stockpiles, others cut back this year because of too much cocoa powder. Prices for cocoa powder fell 11 percent in the second quarter, according to KnowledgeCharts, a unit of researcher Commodities Risk Analysis in Bethlehem, Pennsylvania.

“The last year was so poor that figures for this quarter may not look as bad, but in fact I hardly can imagine they can be good,” said Javier Almela, the chief purchasing officer at grinder Natra SA in Valencia, Spain, which buys almost 40,000 metric tons of cocoa a year. “Grindings cannot be good because the problem of the stocks of cocoa butter seems to have swtiched to the problem of the stocks of cocoa powder. If you want to keep the ratios up, you have to reduce the production.”

Excess Beans

Euromar Commodities GmbH, the European unit of processor Transmar Group, slowed processing capacity “significantly,” resulting in excess cocoa beans, Peter G. Johnson, president of Transmar in Morristown, New Jersey, said on May 16. The company delivered supplies to the futures market at the expiration of the May futures on the NYSE Liffe exchange in London, he said.

Cocoa powder prices in Europe were at 1,839 euros ($2,391) a ton on June 28, KnowledgeCharts data showed. That is down from 2,073 euros a ton at the end of March. Cocoa for September delivery rose 2.3 percent to 1,532 pounds ($2,296) a ton in London. Prices rose 7 percent in 2013.

Cocoa bean processing in the second quarter last year was 292,551 tons, ECA data showed. An 8.3 percent rise would imply about 316,833 tons were ground from April to June this year. That is still less than 339,377 tons processed in the first three months of 2013, ECA data showed. Europe accounts for about 40 percent of the world’s global cocoa bean processing, the International Cocoa Organization (ICCO) in London estimates.

Global cocoa grindings will climb 0.9 percent in the 2012-13 season ending in September, the ICCO estimates. In May, the cocoa group cut its forecast for bean processing to 3.987 million tons from a previous estimate of 4.008 million tons, citing lower cocoa powder prices and slowing economic growth in Asia.

Before it's here, it's on the Bloomberg Terminal.