Cocoa prices rise despite dip in European grind

(AgriMoney) – Cocoa prices continued their recovery, hitting 2013 highs on both sides of the Atlantic, as investors shrugged off data showing the worst start to the year for European grindings since the world economic crisis.

Western European cocoa processors ground 339,377 tonnes of cocoa in the first three months of the year, the lowest for the period since 2009.

The figure, down 3.9% on the January-to-March period of last year, also represented a fifth straight quarter of year-on-year decline.

While investors had expected some decline, Commerzbank cautioned that “prices are likely to respond negatively” given the extent of the drop.

‘No glut this time’

However, prices overcame early weakness to hit $2,337 a tonne in New York for July delivery, the contract’s highest level of 2013, and set a four-month top of £1,556 a tonne in London for July amid hopes for better data to come.

Rabobank said that it was forecasting “flat-to-modestly-positive growth quarter by quarter” in the European grind for the rest of the year, noting positive processing margins.

The comments come the week after chocolate giant Barry Callebaut flagged a recovery in the so-called combined ratio – the price of cocoa products, butter, liquor and powder compared with the cost of the raw beans – from a late 2012 low which had sent its profits lower.

Rabobank said: “We do not expect the same collapse that occurred in 2012, when European grindings fell 17% between the first quarter and the second quarter.

“The overproduction in the first quarter of 2012 that caused a glut in supply has not materialised in the first quarter of 2013.”

Some analysts have also questioned whether the data are being affected by a drop to 21 in the number of cocoa processors reporting data, from 25 a year ago.

Drop in purchases

A rise in prices of 11% in London and 13% in New York from multi-month lows reached in early March has also been supported by speculation of disappointing production in West Africa, which gained credence on Tuesday when Ghana’s cocoa regulator reported a sharp drop in deliveries.

Purchases in 2012-13 up to April 4 were, at 607,877 tonnes, down 15.6% year on year.

“Ghana failed once again in March to reduce its year-on-year shortfall” in purchases, Commerzbank said, if noting talk that in neighbouring Ivory Coast, the world’s biggest cocoa producing country, “deliveries to the ports have caught up with those of the previous season“.

The bank cautioned that the workings behind the Ivory Coast numbers, “based as they are on counting truck numbers, have in the past produced overly-optimistic figures, which have later had to be corrected downwards by official figures”.