Europe Cocoa Processing at 9-Year Low as Factories MigrateMorgane Lapeyre
Grinding of cocoa into ingredients used to make cookies and pralines fell 7.4 percent in the three months ended Dec. 31 from a year earlier, the European Cocoa Association said today. Grindings in the biggest consuming region were 323,061 tons, compared with 348,963 tons a year earlier.
The World Bank cut its forecast for global growth in 2015 this week, as an improving U.S. economy and low fuel prices failed to offset disappointing results from Europe to China. While economic woes are weighing on demand, the drop in grindings also reflected the transfer of processing capacity to West Africa and Indonesia, the main cocoa producers.
“Retail sales have been poor for quite a while and grinding margins have been under significant pressure,” Tracey Allen, analyst at Rabobank International in London, said by phone today. “We are expecting tepid growth in demand to continue into 2015.”
Bean processing generates butter, which accounts for as much as 20 percent of a chocolate bar’s weight, and powder, used in ice cream, cereals and cookies. The so-called combined ratio, a measure of grinders’ profitability, fell 10 percent in Europe in the fourth quarter from the same period in 2013, according to KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania.
Cocoa grinder Euromar Commodities GmbH said in October it would close its Fehrbellin factory outside of Berlin for three weeks over Christmas.
Cocoa for delivery in March slid as much as 1.1 percent to 2,026 pounds ($3,081) a metric ton on ICE Futures Europe today, the biggest drop in two weeks, before trading at 2,046 pounds by 2:16 p.m. in London. In New York, prices dropped as much as 1.2 percent to $2,955 a ton.
Cocoa for March delivery is about 28 pounds a ton more expensive than the May contract in London, a market structure known as backwardation. An inverted market makes it costly to carry stocks, suggesting factories may be inclined to limit grindings.
Ivory Coast, the world’s top cocoa producer, is set to become the biggest grinder of the beans this year, surpassing the Netherlands, according to the International Cocoa Organization. Factories in the west African nation processed just 10,000 tons less than the Netherlands in 2013-14, compared with a gap of almost 180,000 tons in 2010-11, according to ICCO estimates. Grindings in Indonesia, the third-biggest producer, increased by almost 70 percent from 2010-11 to 2013-14, ICCO data showed, as companies such as Olam International Ltd and Cargill Inc. have set up new plants.
Lindt & Spruengli AG Chief Executive Officer Ernst Tanner said two days ago that chocolate consumption won’t rise as fast as expected by some, as Asian demand is as yet too small to have an influence on the global outlook. He anticipated that cocoa prices would fall by the second half of this year.
Processing in North America probably rose 1.9 percent in the fourth quarter, according to the mean estimate of seven analysts surveyed by Bloomberg. The National Confectioners’ Association was due to release its cocoa grinding figures today.
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