Cocoa butter ratios stayed at their highest level since 2009 this week and could rise further as chocolate makers replenish stocks to meet rising demand during summer holidays, dealers said on Friday.
Strong sales at Barry Callebaut also supported butter ratios, which have risen about 10 percent since January to the current level of up to 2.10 times London futures <0#LCC:> for nearby delivery, steady from last week.
Barry Callebaut, the world's No. 1 chocolate and cocoa-product maker, said more outsourcing deals from food groups and strong demand from bakeries and restaurants lifted volumes by a better-than-expected 8.2 percent in the nine months to May.
"Barry Callebaut is one of the supporting factors. We are seeing demand for butter from Europe, and with summer coming, there are chances the ratios will go up further," said a grinder in Malaysia.
"Our offer price is 2.10 times, and we've sold butter at 2.05 times. But I would think less people will be willing to sell butter at 2.05."
Butter gives chocolate its melt-in-the-mouth texture. Butter prices are determined by multiplying the ratio, a value set by grinders, with London or New York cocoa futures. <0#LCC:> <0#CC:>
"Ratios in Asia have been consistently trading at 2.10 times London and they should move higher. There's a lot of interest for nearby and forward shipments, so I believe trade houses will start to get bullish on the ratios," said a dealer in Singapore.
"Consumption is picking up. The buyers are mainly from Europe and the U.S. There's a little bit of panic buying after Barry Callebaut's good results, and people are worried there will be very little supply ahead."
A drop in Asian cocoa grindings in the first quarter of this year because of falling margins also helped spark concerns over butter supply.
The strong butter market kept powder prices at between $2,000 and $2,500 a tonne, with deals at $2,200. Grinders noted demand from Russia and also the Middle East ahead of the Muslim fasting month of Ramadan later this month.
Cocoa beans are ground to produce roughly equal parts of butter and powder, which is used to make cakes, biscuits and drinks.
WEEK AHEAD
Grinders expect butter ratios to stay at multi-year highs next week because of seasonal demand. "I foresee ratios rising to 2.20 to 2.30 times. I think demand will stay strong even after the summer holidays," said the grinder in Malaysia.
Butter ratios last stood around 2.20 times London futures in 2006, and were at 2.30 in 1999.
