Asia Cocoa -Butter ratios edge down; Q4 grindings data awaited

Fri Jan 17, 2014 1:37am EST

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* Butter ratios inch down to 2.27 times London

* Market awaits CAA's Q4 grindings data next week

By Lewa Pardomuan

SINGAPORE, Jan 17 (Reuters) - Cocoa butter ratios, a key indicator of demand, slipped this week on pressure from rising London futures, while trading was thin ahead of the release of grindings data for Asia, dealers said on Friday.

The Cocoa Association of Asia (CAA), which groups grinders in Malaysia, Indonesia and Singapore, plans to release grindings figures for the fourth quarter of 2013 next week.

Poor fourth-quarter grindings in Malaysia maybe be offset by an increase in activities in Indonesia, according to dealers.

"They have issues with beans from Ecuador because of chemical residues. Ecuador has been a very important supplier for Malaysia in the past few years, and we've seen beans stuck at customs," said a dealer in Singapore.

"They had to slow down."

According to data from the Malaysian Cocoa Board, grindings in Malaysia fell 9 percent to 70,064 tonnes in the fourth quarter of 2013 from a year ago, bucking an uptrend in Europe and North America.

Malaysia's total grindings in 2013 dropped 4.6 percent to 285,608 tonnes, which suggested that grinders struggled last year to sell cocoa powder amid mounting inventory.

When ground, cocoa beans yield roughly equal parts butter, which gives chocolate its melt-in-the-mouth texture, and powder - used in cakes, biscuits and drinks.

Butter ratios stood at 2.27 times London futures, down from 2.30 to 2.40 times London futures last week, although there were a few deals ahead of Valentine's Day in February.

Cocoa powder prices were little changed at $1,900 to $2,200 a tonne.

Butter prices are set by multiplying London and New York cocoa futures prices by the ratio. Ratios and futures usually move in opposite directions.

May cocoa on Liffe settled up 7 pounds at 1,758 pounds a tonne on Thursday. ICE March cocoa firmed $5 to end at $2,753 per tonne.

New York cocoa futures, which often dictate London futures, were expected to sustain their upward trend following strong grindings data from Europe and North America, said Vanessa Tan, investment analyst at Phillip Futures in Singapore.

"We peg support at $2,640. This is in line with our fundamental bullish expectation," said Tan, referring to the front month March cocoa contract on ICE.

WEEK AHEAD

The cocoa market will turn its attention to Asia's cocoa grindings data for clues on demand.

Asia's cocoa grindings jumped 12 percent to 161,097 tonnes in the third quarter, reflecting an increase in activity in Indonesia.

"I think the CAA grindings data will either be flat or slightly up," said the dealer in Singapore.

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