German cocoa butter prices have risen sharply as supplies remain tight but demand is strong, traders said on Friday.
Nearby October/December ratios have now risen to between 3.30 to 3.50 from between 3.0 to 2.85 at the beginning of October.
"All hell has been let loose in the butter market," one trader said. "There is good demand from industry but none to be had."
One trader said origin butter producers seem to have great difficulty in selling cocoa powder and cake. When they cut production of these, butter output was also reduced.
This was apparently because the major cake and powder consumers in the baking, ice cream and confectionery industries have changed recipes to use cheaper ingredients and were fully stocked with cake and powder.
"Some origin producers have been offering cocoa butter for sale only on condition that some cake or powder is bought as well," one trader said.
"This had been accepted by some customers but the chocolate makers who are the main butter buyers have as much cake and powder as they need and are now turning this down."
Another trader said the butter market was increasingly dominated by a small group of suppliers able to dictate prices more strongly.
Some German chocolate makers were reversing past decisions to import cocoa products instead of cocoa beans. This was reflected in greater German cocoa bean imports and higher German grindings.
German third quarter cocoa grindings rose 10.6 percent on the year, continuing a series of double-digit increases this year.
Bean purchases by German industry for 2004 deliveries were said to be subdued this week.
One trader said the main bean purchases this week were for the first three quarters of 2005, with purchasing of new supply cover stimulated by the currently low levels of Liffe cocoa futures, which have been falling steadily since late August.
However, supplies of new crop Ivory Coast beans were still not arriving in significant volumes and this meant volumes offered for sale were still restricted.