Asia Cocoa-Chocolate makers shop around; butter ratios at 4-year peak

Fri Jun 28, 2013 3:51am EDT

Related Topics

* Butter ratios traded at 2.03-2.10 times London

* ADM's plan to sell cocoa business watched closely

* Powder prices edge up

By Lewa Pardomuan

JAKARTA, June 28 (Reuters) - Cocoa butter changed hands at their highest ratios since 2009 this week as chocolate makers rebuilt stocks, while seasonal demand from Asia lifted the price of powder, dealers said on Friday.

A plan by Archer Daniels Midland Co to sell its cocoa division also supported the butter market as it helped create concerns over supply in coming months. Butter gives chocolate its melt-in-the-mouth texture.

Butter stood at ratios of 2.03 to 2.10 times London futures , versus 2.03-2.05 times two weeks ago. The ratios have rallied to the current level after grindings in Asia slipped nearly 11 percent in the first quarter on falling margins.

Butter prices are determined by multiplying the ratio, a value set by grinders, with London or New York cocoa futures.

"Demand is coming in but buyers have been buying butter in small volumes. I don't see many people signing contracts for next year's delivery, or I would say there are not many sellers who are willing to do that," said a dealer in Singapore.

"But people are talking about slow grindings and I believe the ADM news has also some impact on the market. I am sure whoever buys the company could cut grindings."

A sale of ADM's cocoa division, one of the world's largest and estimated to be worth $2 billion, would be the second major deal in the industry in just over six months. It is also a sign the firm is focusing on expanding its footprint in the grains sector.

The move comes as Swiss company Barry Callebaut, the world's largest industrial chocolate maker, finalises its $1 billion acquisition of Petra Foods' cocoa operations, tightening its grip on the global cocoa market.

"We sold butter at ratios of 2.10 for the second half of this year, and there are also a lot of inquiries coming in for next year. In my chart, that's the highest ratios since July 2009," said another dealer in Singapore.

"It's driven by fears of industry consolidation and, of course, there's also pure demand."

Chocolate sales normally surge in the main consumer regions of Europe and North America at the time of major festivals such as Christmas, Valentine's Day and Easter.

Cocoa powder was quoted as high as $2,500 a tonne from as low as $1,900 two weeks ago, with demand coming from India, China and particularly the Middle East ahead of the Muslim holy month of Ramadan in July.

Cocoa beans are ground to produce roughly equal parts of butter and powder, which is used to make cakes, biscuits and drinks.

WEEK AHEAD

Cocoa butter could stay at multi-year highs next week as chocolate makers cover stocks but the powder market is likely to be volatile because of ample supply.

"But at least for us, powder prices have stabilised at between $2,050 and $2,150. It's not a big range quoted by others at between $2,000 and $2,500," said the second dealer.

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