North America Cocoa Grindings Unexpectedly Gain in First Quarter

(Businessweek) – Cocoa processing in North America unexpectedly gained for a second straight quarter, signaling increasing consumption.

In the three months ended March 31, grindings, a measure of demand, rose 5.8 percent to 125,887 metric tons from a year earlier, the National Confectioners Association said today in a report on its website. On average, traders and analysts expected a drop to 118,061 tons, according to a Bloomberg survey. Last quarter, processing was up 0.9 percent.

Cocoa prices are up 3.7 percent this year in New York, one of four gainers among the 24 raw materials tracked by Standard & Poor’s GSCI Spot Index, as prolonged rain delayed the harvest in Indonesia. Global demand will outpace supplies by 50,000 tons this season, Marex Spectron Group Ltd. estimates.

“This is a pleasant surprise for the bulls,” Hector Galvan, a senior commodities broker at RJO Futures in Chicago, said in an e-mail. “I would imagine in the near term that this would add premium to the market. This is also likely going to push end-users to move quickly to make further purchases.”

Global consumption will grow annually by 3 percent to 3.5 percent in the next five years, driven by emerging markets, Jonathan Parkman, the co-head of agriculture at Marex Spectron Group in London, said in an interview April 11. In the week ended April 9, money managers raised their cocoa net-long position, or bets on a rally, by 18 percent, government data show.

In Europe, bean processing fell 3.9 percent in the first quarter, exceeding analyst expectations, a European Cocoa Association report showed yesterday.

“Consumption is on an upward path and this continues,”Arthur Liming, a vice president at Citigroup Inc. in Chicago, said today in an e-mailed report. “While Europe is facing particular issues, other areas of the globe should be able to pick up the slack.”