Price ratios for cocoa butter surged in Europe’s cash cocoa market last week on tighter supplies following reduced grindings, while sales offers for beans were cut by concerns about new export rules in Ivory Coast, traders said.
Price ratios for cocoa butter offered for sale for August to December delivery in the European cash cocoa market on Friday were 1.48 times London bean contracts, up from 1.36 times London a week ago and only 1.22 times in early July.
“It is supply and demand plus technical influences from weak cocoa powder,” one trader said. “Cocoa grindings in Europe are being reduced because of the economic slowdown and that means less… butter is being produced.“
Grinding cocoa beans produces the main products cocoa butter and cocoa powder. While butter goes for chocolate making, cocoa powder is used to achieve chocolate flavour in products such as biscuits, cakes and drinks.
Europe’s second-quarter cocoa grind recorded the sharpest quarterly fall for at least 12 years on July 12, dropping 17.8 percent from the same period last year to 292 551 tons.
“The euro zone crisis with spending cuts in so many countries is hitting overall chocolate and confectionery demand, which is causing a fall in bean grindings,” another trader said. “This is causing sudden tightness in nearby butter supplies.
“Only a few weeks ago the industry was faced with ample butter supplies, now the picture is looking a lot worse and it does not look like bean grindings have been increased again in past weeks.”
Traders said poor earnings from flat cocoa powder prices in the face of rising cocoa futures was also pushing processors to seek higher prices from butter to compensate.