The use of cocoa as measured through bean grindings should have risen by up to seven percent in the first quarter of 2004, mainly due to its low level in the first three months of 2003 and more capacity, traders and analysts said on Wednesday.
The European Cocoa Association expects to publish the figure for the first quarter of 2004 next week and traders and analysts expect the number to show a rise of between five and seven percent.
An analyst said the strong growth seen in the last quarter of 2003, when Europe grinded 280,000 tonnes, and the weak number of 250,000 tonnes for Jan/March 2003 against which the 2004 data is going to be compared, should lead to a large percentage growth year on year.
"If there was that kind of capacity in the 2003 fourth quarter, given that processing margins are very high, I don't see why people should want to run their facilities at something less than full capacity.
That's why you should get a big number," an UK-based analyst said.
Germany, a key grinder whose data serves as reference to build expectations for the European number, should also show a significant rise.
"I would say most of the capacity that is back in line is in Germany and their 2003 (first quarter) figure was very weak," a second analyst said, adding the second largest European grinder should use five percent more beans in the whole 2003/04 season than in the previous year.
The top five cocoa grinders in the world are the Netherlands, the United States, Ivory Coast, Germany and Brazil and Asian producers like Malaysia and Indonesia have recently increased their grinding capacity.
Broker Credit Lyonnais Rouse said in its latest report it expected European cocoa bean grindings to maintain in the 2004 first quarter the same rate of growth than in the last three months of 2003, at 6.7 percent.
Analysts said they also expected other countries outside Europe, like Brazil, Indonesia and Malaysia, to experience a rise in grindings.
"Malaysia might have overtaken France as one of the top world grinders this season if we assume their new plants are running at full capacity for now," a third analyst said.
France is one of the world's seven top grinders. UK broker ED&F Man said global grindings for the 2003/04 season should increase by five percent versus 2002/03 due to new processing capacity, particularly in Asia.
Analysts said a hot summer in Europe, the biggest chocolate market apart from the United States, had led to lower chocolate consumption and this led to a drop in cocoa product usage and a build-up in stocks.
Swings in these inventories over the past few seasons have meant grindings have not mirrored consumption closely, although they are still considered the best indicator to measure against production to see if the market is in balance.
The world should see its second surplus in a row in 2003/04 after two consecutive deficits in 2000/01 and 2001/02.
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