Asia Cocoa-Butter ratios near 16-month low on high stocks

JB Foods

07/11/2014 12:47

By Fergus Jensen 
    JAKARTA, Nov 7 (Reuters) - Asian cocoa butter ratios fell 
more to their lowest in nearly 16 months as sellers continued to 
face pressure from high powder stocks and weak demand, traders 
said, despite prices already being below break even point for 
grinders. 
    Butter ratios, a key indicator of demand, were quoted as low 
as 2.1 times London futures  0#LCC: , their lowest since July 
2013, although offers were seen up to 2.2 times. Two weeks ago, 
ratios stood at between 2.2 to 2.25 times futures.  COCOA/ASIA1  
    Cocoa beans are processed into roughly equal parts butter, 
which gives chocolate its smooth texture, and powder, which is 
used in cakes, biscuits and drinks. Grinders do not generally 
release data on the size of their powder stocks. 
    Cocoa butter prices often move in the opposite direction to 
powder, as grinders seek to offset or balance their prices when 
either butter or powder prices are low. 
    "The market is very weak in terms of product prices," a 
trader told Reuters, adding that powder prices had improved 
slightly this week to between $1,750 and $1,850 a tonne, up from 
$1,600 a tonne last week. 
    "Of course there is still a lot of resistance from customers 
to pay up." 
    Grinders often pair the sales of butter and powder in 
"combo" or combination deals to prevent a build-up in stocks.  
Grinders will then sell butter at a fixed, but smaller, ratio on 
condition the buyer also takes some powder. 
    Combo ratios, formed by adding together the ratios for 
butter and powder, were quoted as low as 2.6 times London 
futures this week but up to 2.9 times, well below the break even 
point of between 2.9 and 3.05. 
    "We see cocoa grinders really wanting to increase prices - 
to account for the fact that the combo ratio is not making them 
money," a second trader said, adding that prices would only 
likely begin to recover when grinders stopped producing. 
    "Somebody will have to stop running their machines - they 
will have down time until the market fully absorbs all the 
product, and then prices will come back." 
    Powder purchases from the food and beverage industries in 
Asia have yet to catch up with a jump in output as Indonesia 
overtakes Malaysia as Asia's largest grinder, resulting in an 
oversupplied market and pushing down powder prices.  COC/AS  
    Indonesia's grinding capacity is expected to jump 85 percent 
to 600,000 tonnes by the end of 2014, boosted by new plants for 
firms such as Cargill  CARG.UL , Barry Callebaut  BARN.S , and 
Malaysian Guan Chong Berhard  GNCH.KL . 
 ID:nL1N0O20SB  ID:nWNBB04GPE   ID:nL3N0O71ZX   ID:nL4N0MV2IT  
    Exports of cocoa beans from Indonesia's main growing regions 
of Sulawesi and Lampung dropped 36 percent and 88 percent, 
respectively in October from a year earlier, as more beans were 
take by domestic grinders for processing. 
 ID:nL3N0RW1QN  ID:nL4N0ST1YH  
    The archipelago is aiming become the world's top cocoa bean 
producer, newly appointed Indonesian president Joko Widodo said 
in Sulawesi on Thursday, as quoted by domestic media, pledging 
to spend 1.2 trillion rupiah ($98.60 million) to rejuvenate and 
rehabilitate cocoa plantations. 
    "We hope that in the coming years, we will surpass Ivory 
Coast and Ghana (cocoa producers), and so, the farmers must also 
work hard," Widodod said as quoted by Antara state newswire. 
    Top industrial chocolate producer Barry Callebaut said cocoa 
prices were now coming down to more realistic levels after 
having been pushed up by concerns over the ebola virus affecting 
output.  ID:nL6N0SW0MS  ID:nL6N0ST2N2  
    New York March cocoa  CCH5  was little changed on Friday, 
settling up $1 at $2,871 a tonne, while London March cocoa 
futures  LCCH5  gained 16 pounds, or 0.9 percent, to settle at 
1,894 pounds per tonne. 
 
(1 US dollar = 0.6324 British pounds) 
(1 US dollar = 12,170 rupiah) 
 
 (Reporting by Fergus Jensen, editing by William Hardy) 
 ((fergus.jensen@thomsonreuters.com; +62 21 2992 7604; Reuters 
Messaging: fergus.jensen.thomsonreuters.com@reuters.net)) 
 
Keywords: COCOA PHYSICALS