Europe cocoa: Chocolate industry waiting for price falls

Fri Jul 18, 2014 11:09am EDT

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* Industry restrains purchases in hope of futures fall

* Bean differentials nominal in quiet trade

HAMBURG, July 18 (Reuters) - Trade in Europe's cash cocoa market remained restrained this week as industry hoped cocoa futures will continue their drift down from around three-year highs touched in early July, traders said on Friday.

"Futures dipped this week but it was not enough to generate substantial buying and I found industry purchase interest again very weak," one cocoa trader said. "The chocolate industry is suffering from high cocoa prices and I think it is waiting for a substantial fall below 1,900 pounds in London futures before buying."

Cocoa futures fell sharply on Wednesday on fears chocolate demand may fall, after U.S. confectionery maker Hershey Co raised retail prices because of high cocoa prices. But futures firmed again on Friday, supported by a rise in Asian and North American cocoa grinds.

Liffe December cocoa was above the industry purchase target at 1,905 pounds a tonne at 1501 GMT on Friday.

European bean price differentials were slightly weaker but are often regarded as nominal because of thin European industry demand.

Industry was running down supply cover in the hope of futures falls, traders said.

Good quality Ivory Coast beans for August/September delivery were quoted down 5 pounds at a differential of 75 pounds over the London September bean contract.

Cocoa butter, the ingredient which gives chocolate its melt-in-the-mouth quality, was quoted unchanged at 2.60 times the London September bean contract.

Some limited early-week butter purchase interest for 2015 deliveries was seen.

"Fundamental news from West Africa remains positive, with very high cocoa arrivals in Ivory Coast export ports and positive weather for crops there," a trader said. "There is no shortage of cocoa with good volumes offered for sale in Europe.

"Buyers are hoping a more positive supply outlook will push futures down from the current high range." (Reporting by Michael Hogan; Editing by David Holmes)

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