Asia Cocoa-Butter ratios hit 21-month low on slow demand, could go lower

JB Foods

06/02/2015 09:48

* Butter ratios at 1.95-2.0 times London futures 
    * Market unusually quiet - traders 
    * Powder trading at $1,800-$2,100 per tonne 
 
    By Fergus Jensen 
    JAKARTA, Feb 6 (Reuters) - Asia's cocoa butter ratios hit 
their lowest in 21 months as slow demand continued to push 
prices below cost for grinders, who are waiting for excess 
stocks of both butter and powder to dry up and trigger a 
reversal, traders said. 
    The cocoa market is unusually quiet despite a forecast drop 
in grindings this quarter, traders said, referring to recent 
price increases by major confectioners such as Hershey Co 
 HSY.N  that had hit demand for chocolate. 
    "The world is not eating enough chocolate," one trader said, 
noting that they were waiting to see December-January 
consumption data. 
    Buyers, meanwhile, are betting that the supply surplus would 
push cocoa powder and butter prices lower. 
    "There's too much supply versus demand. The (confectionary) 
industry is waiting for lower ratios," another trader told 
Reuters, noting that butter ratios were "generally flat." 
    Butter ratios, a key indicator of demand, were quoted at 
between 1.95 and 2.0 times London futures  0#LCC: , down from 
between 2.07 and 2.1 times in December, their lowest level since 
April 2013. COC/AS  
    Cocoa processing in Asia dropped to its weakest level in at 
least three years in the fourth quarter of 2014, amid poor 
demand that is likely to further drag on global bean prices. 
 ID:nL4N0V23JI  
    "With all the reduction in grinding, at some point butter 
stocks will be tight and then ratios can rise, but no one knows 
when," said the second trader. 
    Grinders do not reveal the size of their butter or powder 
stocks. 
    Other traders attributed the recent lull partly to the 
approaching Chinese New Year holiday, which falls on Feb. 19. 
    "It's like a holiday season. The first quarter grind will be 
low as well. It's supposed to be busier," a second trader said. 
    Physical stocks of powder, used in cakes, biscuits and 
drinks, are still high, traders said, quoting prices between 
$1,800-$2,100 per tonne, up from the $1,700 to $1,900 level seen 
in December. COC/AS   
    "I believe it will take at least a year of slower grinding 
and selling of stocks to reduce overall stocks. It's very much a 
timing game." 
    Exports of cocoa beans from Indonesia's main growing island 
of Sulawesi jumped 207 percent to 2,336.12 tonnes in January 
from 760 tonnes a year earlier, industry data showed on Monday. 
 ID:nL4N0VC45D  
    Indonesia, the world's third-biggest cocoa bean producer, is 
expected to launch a $95 million scheme to help double output, 
an industry group said in December.  ID:nT9N0NH039  
 
 (Reporting by Fergus Jensen; Editing by Gopakumar Warrier) 
 ((fergus.jensen@thomsonreuters.com; +62 21 2992 7604; Reuters 
Messaging: fergus.jensen.thomsonreuters.com@reuters.net)) 
 
Keywords: COCOA PHYSICALS/