* Chocolate makers rush to buy butter from rivals
* Cocoa butter ratios hit multi-month highs
* Some bean processors cut back on grindings
By Marcy Nicholson and Lewa Pardomuan
NEW YORK/SINGAPORE, June 16 Chocolate makers
including Barry Callebaut are racing to buy cocoa
butter from their competitors this summer, pushing price
premiums to their highest in months.
The scramble for butter reflects a growing imbalance in the
market for the two main substances produced from grinding a
cocoa bean: butter, which gives chocolate its melt-in-the-mouth
texture, and powder that is used in cakes, biscuits and drinks.
Years of rapid expansion in the cocoa-grinding industry have
given rise to a global abundance of powder stocks, driving down
prices, even while the need for premium-fetching butter expands.
Now, that trend is reversing: some processors are cutting back
on grinding their own beans and buying instead on the open
Barry Callebaut, the world's biggest maker of industrial
chocolate, recently bought butter in Europe for its chocolate
needs, according to a source familiar with the purchases.
"As far as I know, they still need butter for next year, so
they are hedging some of the volumes, small volumes," an
Asian-based industry source said, referring to Barry Callebaut.
A Barry Callebaut spokesman declined to comment.
Barry Callebaut is not alone. Other large grinders are also
in the market as some reduce their own output, sources say.
"All the big grinders have been in the market. It's been
very active," one U.S. trader said.
In Asia, the price of cocoa butter has risen to 2.50 times
the cocoa futures price in London <0#LCC:>, the highest ratio
since December and up from 2.40 a month ago. In the
United States, it is at a five-month high around 2.70 times the
ICE Futures U.S. futures contract, versus 2.65 a month prior,
and in Europe is around 2.60 times the London
contract, a six-month peak CCAFR-BUTNE-P1.
Cocoa futures are at the highest levels in nearly three
years, lifting nearby butter prices above $8,400 per tonne
against the spot contract in the United States and $8,600 per
tonne in Europe.
Butter demand has been strong since the second half of 2013,
and grinders have been feeding that market -- in the process
topping up stocks of powder.
Grinders do not reveal the size of their stocks and
chocolate makers had been waiting for the butter ratio to drop
after Easter celebrations, but further gains caught them by
surprise, prompting the recent round of purchases on fear they
will rise even higher.
"We have spoken directly to Asian processors ... who have
confirmed slowdown in pressing," said one industry source.
Asia Pacific is the No. 3 region for overall cocoa
consumption but the biggest for powder, having consumed a
quarter of the world's volumes in 2012.
In 2014, Asian consumption of both powder and butter are set
to rise by more than 4 percent each, whereas in the United
States, butter consumption is forecast to inch lower as
chocolate demand falls on discretionary buying and a switch to
healthier foods, International Euromonitor data shows.
The readily available powder and apparent slow-down in Asian
bean processing, with an estimated increased capacity of 200,000
tonnes, comes as international cocoa grinders go through with
multi-million dollar expansions in Indonesia, the world's third
biggest cocoa producer and currently facing a bean shortfall.
Swiss-based Barry Callebaut bought Singapore's Petra Foods
Ltd's cocoa business in 2013, and commodity giants
such as U.S.-based Cargill and Malaysian cocoa group
Guan Chong Berhard have set up operations there. Olam
is set to start building a new plant.
"We are constantly in an oversupply situation," said another
While many powder buyers in the United States have secured
supplies through 2015 and are already shopping into 2016, those
seeking immediately available butter can't find a seller,
"Demand for butter is nearby, demand for powder is two
years forward," another U.S. trader said.
(Editing by Jonathan Leff)