Cocoa-Butter Ratio Rises to Highest Since 2009 as Powder Slides

The cost of cocoa butter relative to bean prices rose to the highest in more than four years in Europe as supplies declined and grinders compensated for lower powder prices, said four traders with knowledge of the sales.

The so-called butter ratio was 2.30 to 2.33 times the cost of cocoa futures on the NYSE Liffe exchange, said the traders, who asked not to be identified because they aren’t authorized to speak to the media. That was the highest since 2009 and compares with a ratio of 2.29 on July 26, according to data on the website of KnowledgeCharts, a unit of cocoa researcher Commodities Risk Analysis in Bethlehem, Pennsylvania.

Cocoa processing, or grinding, generates byproducts such as powder and butter. Powder prices in Europe were 1,747 euros ($2,309) a metric ton on July 26, down 32 percent this year, KnowledgeCharts data showed. Grinders can sometimes raise butter prices to make up for declines in powder costs in an effort to keep stable the so-called combined ratio, a profitability gauge.

“Although powder prices remain depressed, butter prices have been strong enough to lift the combined butter-powder ratio off its worst levels of the year,” Sholom Sanik, an analyst at Friedberg Mercantile Group Ltd. in Toronto, said in a report e-mailed yesterday. Higher butter ratios “provided an incentive for processors to buy beans for grinding.”

Cocoa grindings climbed 6.1 percent in the second quarter in Europe and gained 12 percent in North America, data from the Brussels-based European Cocoa Association and the National Confectioners Association in Washington showed. Asian bean processing advanced 2 percent, according to data from the Singapore-based Cocoa Association of Asia.

Cocoa butter accounts for as much as 20 percent of a chocolate bar’s weight, and powder is used to make chocolate-based cookies, soft drinks and ice cream. Futures for September delivery rose 0.3 percent to 1,577 pounds ($2,390) a ton by 3:37 p.m. in London.

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