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The cocoa harvest is underway in Indonesia's island of Sulawesi, but daily arrivals began to slow down this week, suggesting the crop harvest could end earlier than usual, dealers said on Friday.In the product market, butter ratios held near their weakest ever below 1.0 times London futures, but sporadic demand from chocolate makers before the start of the summer holidays offered solace to grinders.
Butter ratios stood at 0.92 times London futures, having been quoted by some grinders in Southeast Asia at all-time lows of 0.80 times last week. Butter is a key ingredient for making chocolates. "I think the demand for butter has improved a bit. If you look at the terminal prices in London, then you will see that the outright price for butter is very cheap," said a dealer in Singapore."A lot of confectioneries can afford to buy more butter. They can afford to buy butter for forward shipments. That's because of the low ratios and low prices in London.
"When processing beans, grinders get butter and cake, which is later pressed into powder and used for coatings in chocolate making, beverages and ice cream. Powder prices slipped to $3,750 a tonne from between $3,900-$4,500 two weeks ago on weakening demand. The price of cocoa butter is determined by multiplying a ratio, whose value is set by grinders, with relevant London and sometimes US cocoa futures.
Butter is also used to make spreads and soaps. Liffe July cocoa futures ended 21 pounds higher at 1,471 pounds a tonne on Thursday, within sight of their weakest since mid-April. The contract was nearly 10 percent below a peak in January as worries about the debt crisis in Europe spurred selling in soft commodities.
Grinders in Singapore and Malaysia buy cocoa beans from Indonesia, the world's third-largest producer after Ivory Coast and Ghana. The main crop in Sulawesi normally starts in April and peaks in July and August before a smaller harvest, widely known as the mid-crop, begins in October or November. "The bean count is good and is below 120, but I am not sure about the volume. It seems the crop will be short this year, so things may slow down in June," said a dealer in Makassar, the provincial capital of South Sulawesi."Daily arrivals are estimated at 300 to 400 tonnes this week, compared with around 500 tonnes two weeks ago."
The national standard for bean count is 110 beans per 10 grams. Bean counts measure quality, with a lower count indicating good quality beans.Despite heavy rains in the first quarter, the full-year cocoa bean output is likely to show a near 10 percent increase, according to the Indonesian Cocoa Association.

Copyright Reuters, 2012

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