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EU, US cocoa grind slump a ‘surprise’ as capacity shifts to Asia, says analyst

Zoom in font  Zoom out font Published: 2012-07-24  Authour: Oliver Nieburg  Views: 69
Core Tip: EU and US cocoa grinds have fallen significantly in the second quarter (Q2), but one analyst puts this down to the developing Asian market eating up a greater share of global supplies.
The European Cocoa Association recently reported a 18% decline in EU cocoa processing to 292,551 tonnes, while the National Confectioner’s Association (NCA) last week reported a 9.8% drop in cocoa grinds in North America to 112,768 tonnes.

Cocoa grind stats are a key indicator of consumer demand for chocolate and cocoa products, along with product ratios.

Cocoa demand hike in Asia

Keith Flury, senior commodity analyst at Rabobank International told: “The European grinding data did surprise the market, but the drop was a function of capacity shifting to Asia where demand is increasing and at origin due to lower costs.”

The Cocoa Association of Asia reported last week that cocoa grinds in the region were up 6% on the same period last year to 150,726 tonnes
Demand for cocoa in Asia is high as many leading confectioners are experiencing sales growth that is outpacing growth in developed markets.
Nestlé, for example, saw a 12.2% sales boost in Asia, Oceania and Africa in its Q1 results, which was over double the growth rate it saw in Europe and the Americas.

Another major confectioner, Hershey, looks set to require more cocoa for Asia as it plans to open an R&D centre in China later this year and plots a new manufacturing facility at an as yet unnamed location.

“Asian grindings have increased significantly. Indonesia capacity has been increased as the government put a cocoa bean export tax on,” added Flury.

‘Anemic’ demand in Europe and US

However, consumer demand for chocolate products in the largest cocoa grinding regions seems to be waning.

“Chocolate manufactures are dealing with anemic demand in Europe and US, but are being helped by lower cocoa prices,” said Flury.
In its latest Agri Commodities monthly report, Rabobank said that the European grind data was the lowest since 2004.

One of the leading cocoa processors Barry Callebaut felt the impact of weakening demand in Europe in its first quarter results announced in April where it saw profits within the region fall 12.2%.

Outlook

Rabobank forecasts that global cocoa grinds, which have grown 5.6% and 5.5% in the previous two seasons, will slow to 2.4% for 2011/12. Growth is expected to be maintained by demand in Asia in spite of the market situation in Europe.

Flury said that lower cocoa prices were also to blame for lower cocoa grinds in the US and Europe.

The ICCO’s monthly average cocoa price for June stood at $2,264 per tonne, which was 25% lower than the same period last year.

Rabobank expects ICE and Liffe futures to rise around 10% by the end of the current season, bringing prices to $2,500 per tonne and £1,650 per tonne respectively.

 
 
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