SINGAPORE: Cocoa butter ratios held steady at a five-year high as chocolate makers chased cargoes for this year’s delivery, but powder prices could slip next week on slow demand, dealers said on Wednesday.
Chocolate makers who have delayed their purchases are now rushing to buy butter to meet demand. But since butter and powder often move in opposite directions, a rally in the price of one product could weigh on another.
Cocoa beans when ground yield roughly equal parts of butter and powder, which is used in cakes, biscuits and drinks. Butter, which gives chocolate its melt-in-the-mouth texture, stood at ratios of 2.75 times London futures.
"There’s demand for nearby delivery, and people are still quite desperate to buy. But trading is slowing off a little bit," said a dealer in Singapore.
"Powder prices are still stuck between US$1,500 and US$1,700 a tonne and the market is very slow. But I can see powder demand coming back at below US$1,400. I think consumers need powder but they are looking at lower prices."
Powder prices were offered at US$1,600 to US$1,700 a tonne last week, sharply lower than US$4,000 a tonne in January.
Chocolate sales normally surge in the main consumer regions of Europe and North America during Christmas, Valentine’s Day and Easter. In the United States, chocolate makers are also preparing for Halloween.
A grinder in Malaysia noted demand for powder from the Middle East and India, but prices were still pressured by the strong butter ratios.
Butter prices are determined by multiplying the ratio, a value set by grinders, with London or New York cocoa futures. At the current ratios, butter prices were roughly at around US$7,500 a tonne.
Butter ratios have soared to their strongest since 2008 in Asia and Europe, and hit eight-year highs in the United States, after last year’s sluggish market and high powder inventory prompted grinders to cut capacity.
"Buyers are still looking for grinders who want to sell butter, but I think most sellers are already committed," said the grinder in Malaysia. "Powder is under pressure, although we are still selling some cargoes."
But butter ratios may also soften at the end of the year as some grinders in Malaysia are looking to shift stocks of low-quality cocoa butter, which can be sold to chocolate makers after being treated to reduce acridity.
Grinders have been saddled with substandard supply after processing African beans that developed a high acid content on the long journey to Asia.-- Reuters