Cocoa butter prices have weakened in Asia because of ample supply but scattered demand ahead of the Easter holiday may provide some support, traders said on Thursday.
Malaysian quoted butter, a key ingredient for chocolate, and Indonesian grinders at 1.95 times London futures for spot shipments versus 1.96 to 2.05 times last week.
April/May ratio stood at 1.90 and June/July at 1.85 times
"People will still be buying butter for Easter but i think we are heading for a quiet period," said one regional dealer.
Easter is celebrated in April. "Most of the chocolate industry gets their requirement well in advance," he added.
Dealers said a softening ratio in Europe had caused some concern in Asia because local grinders normally look to the European market for price direction.
A volatile London futures market had encouraged buyers in Europe to stay on the sidelines, putting pressure on the ratio. Chocolate manufacturers were also well covered ahead of the Valentine's Day celebration in February, they said.
A fire hit the ADM Cocoa Wormer Distribution Centre in the Netherlands in December, destroying an unspecified amount of powder.
In July, a fire destroyed 13,500 tonnes of powder at a warehouse used by Cargill, also in the Netherlands. London cocoa futures fell on Wednesday in reaction to an upward official revision of the Ivorian output estimate.
Front-month March lost 44 pounds at 879 pounds a tonne. "The ratio in Europe is much weaker than it was. You are talking about nearby ratio at 2.15 times, April/May at 2.1 and June/July at 2.05," said the regional dealer.
"But there's a better demand in Europe at the moment for premium quality cocoa powder because of the two fires. They destroyed something like 25,000 tonnes of premium quality powder," he said.
When cocoa beans are processed, grinders get butter and cake, which is later pressed into powder. Powder is mostly used for coating in chocolate manufacturing and in beverages and ice cream.
"Last month I offered butter at 2.02 times London for nearby but now the ratio has dropped. I am not happy about this," said one grinder in Malaysia, Asia's largest grinder.
"I heard the two new factories in Johor have a lot of butter for sale," he said. "I think that's the reason why prices are weakening.
I heard they dump butter and powder." Dealers said Malaysia was projected to grind 160,000 tonnes of beans in 2004/05 (October-September) against 150,000 tonnes in the previous season because of the two grinders in the southern state of Johor in Peninsular Malaysia.
Traders in Indonesia's main growing area of Sulawesi said around 650 tonnes of beans would leave for Pasir Gudang in Johor this week from the key port of Makasar, which reflected a steady demand from Malaysia.
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