Cocoa Butter Declines in Europe as Grinders Boost Processing

(Bloomberg) – The price of cocoa butter relative to that of beans, which gained 65 percent last year, fell in Europe in the past month as processors boosted output, according to three traders who have direct knowledge of the sales.

The cost of cocoa butter relative to the price of beans, or the so-called butter ratio, was 1.80 to 1.85 times cocoa futures on the NYSE Liffe exchange, said the traders, who asked not to be identified because they aren’t authorized to speak to the media. The ratio was 2.05 to 2.1 a month ago.

Delfi Cocoa (Europe) GmbH, owned by Singapore-based Petra Foods Ltd., is increasing processing at its Hamburg plant after a six-month slowdown, Karel Menu, the company’s managing director, said on Jan. 7. Cargill Inc., the U.S.’s largest closely held company, started to increase grindings after cutbacks last year, Jos de Loor, president of the cocoa and chocolate unit, said Nov. 21. Barry Callebaut AG said in December it agreed to buy Petra Foods’s cocoa ingredients unit.

“After some tightening since late last year, cocoa butter ratios have fallen below 2 in Europe this month and are also lower in Asia, implying decent supply hitting the market,”Aakash Doshi, a strategist at Citigroup Inc. in New York, wrote in a report dated Feb. 15.

Cocoa Processing

Global cocoa bean processing will be 4.05 million metric tons in the 2012-13 season that started Oct. 1, Citigroup estimated in a report dated Feb. 15. Production will be 4.05 million tons, leaving the world with a shortage of 50,000 tons, Doshi estimated. Ivory Coast and Ghana, which account for 58 percent of the world’s output, will produce together 2.37 million tons, the bank forecasts.

Cocoa from Ivory Coast, the world’s largest producer, is at a premium in Europe of 42.50 pounds ($65) above Liffe prices, according to the midpoint of the estimates of the three traders. That is little changed from a month ago. The traders provided ranges of 35 pounds to 50 pounds now compared with 40 pounds to 45 pounds a month ago.

Beans from Ghana, the world’s second-largest producer, are 82.50 pounds above the exchange price, the midpoint of the trader estimates. That’s up from 77.50 pounds a month ago. The ranges were 80 pounds to 85 pounds now compared with 75 pounds to 80 pounds a month ago.

Cocoa for delivery in March rose 0.2 percent to 1,402 pounds by 4:41 p.m. today in London.