SINGAPORE: Malaysian grinders are looking to shift stocks of low-quality cocoa butter, sources told Reuters, offering some relief to buyers hit by sky-high prices for the chocolate-making ingredient.
Grinders have been saddled with substandard supply after processing African beans that developed a high acid content on the long journey to Asia.
Extra supply from the region’s biggest bean grinder would drag on prices that reached their highest in five years in Asia in September at around US$7,500 a tonne, as chocolate makers rush to replenish stocks ahead of the peak Christmas season.
"Butter stocks with high acidity have reached at least 3,000 tonnes in Malaysia. Tightness in butter supply is expected to ease in the next two to three months as grinders work on these stocks," said a source at a grinder, who declined to be named as he is not authorised to speak with media.
A second grinder source estimated such stocks at a more conservative 1,000 tonnes.
Malaysia, which accounts for about seven per cent of global grindings, usually produces around 8,000 tonnes of butter a month. It has been using more cocoa beans from West Africa after neighbouring Indonesia, the world’s third-largest bean producer, in 2010 imposed a monthly export tax of up to 15 per cent of bean sales price to encourage local grinding.
Parts of shipments of beans from Africa tend to turn mouldy on their two-month journey to Malaysia, sometimes pushing acid levels in cocoa butter as high as 2.5 per cent.
A simple process, known as deodorisation, can usually cut free fatty acids in cocoa butter to an acceptable 1.75 per cent, although stubbornly high levels require further treatment.
Grinders also have the option of blending substandard butter with higher-quality product.
"(Inferior butter) can be blended with good butter but you have to sell it at a discount," said a dealer in Singapore, adding that he had recently been offered such product.
Listed grinders in Asia include Guan Chong Bhd and Davomas Abadi Tbk, while Archer Daniels Midland Co has a cocoa processing facility in Singapore.
Butter prices are determined by multiplying a value set by grinders - known as the ratio - with London or New York cocoa futures. Ratios currently stand at 2.75 times London futures.
A further option available to grinders looking to deodorise butter is to seek assistance from the country’s multitude of palm oil companies, who have machinery that can easily be adapted to the task.
"If grinders don’t have the capacity or facility to treat butter further, they can approach palm oil refiners to help get the job done," said the source at the first grinder. "My company is currently studying this approach."-- Reuters