Cocoa Nears Three-Week High on European Processing; Coffee Drops

(Bloomberg) – Cocoa climbed to the highest level in almost three weeks in London as bean processing in Europe, the biggest consuming region, gained more than traders had forecast in the fourth quarter. Coffee and sugar declined.

Bean processing in Europe, which accounts for about 40 percent of global grindings, gained 6.2 percent year-on-year in the three months ended Dec. 31, the Brussels-based European Cocoa Association said on its website today. That’s higher than the 4.1 percent increase forecast in a Bloomberg survey of 12 traders, brokers and grinders published on Jan. 10. There are currently 20 companies reporting figures to the ECA.

“The ECA number is probably a record for the fourth quarter because we no longer have Fuchs and Hoffmann and Ludwig reporting,” said Jonathan Parkman, co-head of agriculture at Marex Spectron Group in London, referring to German grinders that stopped reporting figures. “Taking a conservative estimate of what they might actually have ground in that quarter, it probably puts the fourth quarter ECA grind at an all-time record, which goes a long way to confirming that the chocolate markets in Northern Europe and North America are back to, if not better than, pre-financial crisis levels.”

Cocoa for delivery in March gained 0.5 percent to 1,771 pounds ($2,909) a ton by 11:44 a.m. on NYSE Liffe in London. The price touched 1,775 pounds, the highest for a most-active contract since Dec. 27. Futures for delivery the same month climbed 0.6 percent to $2,769 a ton on ICE Futures U.S. in New York. Futures trading volumes were 63 percent higher than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

Bean Processing

Bean processing in Europe was 348,406 tons in the fourth quarter, smaller than the 2011 figure, ECA data showed. In Germany, grindings gained 7.8 percent in the period to 101,029 tons, the Bonn-based Association of the German Confectionery Industry said today. Fuchs & Hoffman GmbH and Ludwig Schokolade are two German grinders that no longer report their processing figures. Grinds fell 9 percent in Malaysia in the period to 70,064 tons, according to the Malaysian Cocoa Board.

Barry Callebaut AG (BARN), the top cocoa processor and biggest maker of bulk chocolate, said sales volume gained 19.5 percent in the three months ended Nov. 30, driven by the acquisition of Petra Foods Ltd.’s cocoa unit. Without the new business, sales rose 4.6 percent, higher than the 3.4 percent gain in the global chocolate confectionery market. Lindt & Spruengli AG’s organic sales climbed 8.6% in 2013, it said yesterday.

“Malaysia was down, but it’s not particularly different from the third quarter, which is pretty much what we would expect,” Parkman said. “Combine the grind data out today, the Barry Callebaut numbers, the Lindt numbers yesterday, that all seems to me to be painting a picture of strong global chocolate consumption growth. The long-term trend is something close to 3 percent and these numbers were above that.”

African Deliveries

“Strong” cocoa deliveries in Ivory Coast and Ghana, the largest growers, are narrowing forecasts for a shortage this season, Barry Callebaut said in an earnings statement today. That “slowed the bullish momentum in cocoa prices,” it said. Consensus probably points to a deficit of about 100,000 tons compared with 150,000 to 200,000 tons six weeks ago, according to Parkman. Cocoa gained 21 percent in New York last year, the second-best performer in the Standard & Poor’s GSCI index.

Bean arrivals at Ivorian ports climbed 33 percent from the start of the season on Oct. 1 through Jan. 12 compared with a year earlier to the highest level since at least 2004-05, data from KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania, showed. In Ghana, bean purchases rose 27 percent from Oct. 1 to Dec. 19 to the highest since 2010-11, according to the data.

U.S. Data

“If you take out the froth of the market reaction to the grind which will be today and when the U.S. data comes out tomorrow, where we are likely to be next week, I’d be surprised if we are much higher than where we are now,” Parkman said, refrring to futures prices. “I think the market is probably reasonably priced if not a little over-priced given the enormous length that the funds have.”

White, or refined, sugar for delivery in March fell 0.9 percent to $420.40 a ton on NYSE Liffe. Raw sugar for delivery in March dropped 1 percent to 15.34 cents a pound on ICE.

Robusta coffee for March delivery slid 0.6 percent to $1,717 a ton in London. Arabica coffee for delivery in the same month fell 0.4 percent to $1.1875 a pound on ICE.