European Cocoa Grind Seen Rising 4.1% as Growth Spurs Demand

Cocoa processing in Europe, the biggest consuming region, probably rose for a third quarter in the three months ended Dec. 31, with global economic growth helping to support demand for the beans used to make chocolate.

The so-called grind, an indication of demand, gained 4.1 percent in the fourth quarter from a year earlier, according to the mean estimate of 12 traders, brokers and grinders surveyed by Bloomberg. Processing rose 4.7 percent in the previous three months and 6 percent in the second quarter, after falling 3.9 percent in the first three months of the year, data from the European Cocoa Association showed. The ECA will publish the fourth quarter figures on Jan. 15 at 7 a.m. London time.

Global chocolate confectionery sales will rise 6.3 percent to a record $117 billion this year, estimates Euromonitor International Ltd., a consumer research company based in London.

Rising demand for chocolate meant cocoa butter, a product of bean processing which accounts for as much as 20 percent of the weight of a chocolate bar, rallied 21 percent last year, according to data from KnowledgeCharts, a unit of Commodities Risk Analysis in Bethlehem, Pennsylvania.

“We expect the grindings to be good in Europe and surprise to the upside in the U.S. as butter stocks are still very low and the combined ratio is still profitable for processors,”

Jeff Adler, a managing director at M. J. Nugent & Co. in New York, said by e-mail yesterday. The combined ratio is a measure of grinders’ profitability. “The world economies are also recovering and that’s positive for demand.”

**Cocoa’s Climb **

Cocoa gained 21 percent in London and New York last year, making it the second-best performing commodity in the Standard & Poor’s GSCI gauge of 24 raw materials. The first was natural gas. Prices rose as demand improved and shortages were forecast for 2012-13 and the current marketing year. Global supplies will trail demand by 75,000 tons in 2013-14, Adler said.

Bean processing also yields cocoa powder, used in soft- drinks and cookies. The price of powder, which fell last year, rallied in the fourth quarter, helping cushion a drop in the so- called combined ratio. Cargill Inc. said yesterday that cocoa powder markets “saw firmer demand and sales volume” in the three months ended Nov. 30. Barry Callebaut AG, the top maker of bulk chocolate, said on Nov. 7 powder prices would start to rise and the combined ratio remain at “good levels.”

The price of cocoa powder rose to 1,702 euros ($2,321) a ton on Dec. 27 from 1,404 euros on Sept. 27, while the cost of cocoa butter, or the so-called butter ratio, fell to 2.44 times the futures in London from 2.74 in the same period, data from KnowledgeCharts showed. The combined ratio slid 5.2 percent in the period to 3.25 times the futures, according to the data.

Global Processing

European processing in 2012’s fourth quarter was 327,982 tons, according to the Brussels-based ECA. A 4.1 percent rise would imply about 341,429 tons were ground from October to December last year. That’s still less than the 349,756 tons processed in the same period of 2011, ECA data showed. Europe accounts for about 40 percent of global cocoa processing, the International Cocoa Organization in London estimates.

“The winner among food commodities was cocoa, which continues its long, demand-driven trend upwards,” Martin Jansson, a commodity strategist at Handelsbanken Capital Markets, said in a report yesterday, commenting on last year’s performnace. “The outlook for rising cocoa prices is still good, leaving chocolate lovers with a bitter after-taste.”

Cocoa for March delivery rose 0.7 percent to 1,728 pounds ($2,844) a ton by 2:20 p.m. on NYSE Liffe in London and earlier touched 1,732 pounds, erasing declines for the year.

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