The price of cocoa powder, which was hovering at 10-year low, barely moved in Asia this week despite renewed buying interest from chocolate manufacturers ahead of Christmas, dealers said on Thursday.
Dealers also noted sales of poor quality cocoa powder by grinders in Indonesia, which is Asia's second-largest grinder after Malaysia. The low quality powder is made cocoa of bean shells and sold at around $185 a tonne, they said.
"The powder is 100 percent made of shells. I don't know who the buyers are but I think that's crazy," said one grinder in Malaysia. Some dealers speculated that China could be the consumer as the country's grinders sometimes-relied on poor quality beans to make powder, which is used in confectionery, beverages and ice cream.
Using lower quality beans, whose content may be five times higher than the normal two percent, the grinders produce low-grade powder mainly for local consumption, they said.
High-quality powder was on offer in Malaysia at between $700 and $800 a tonne, free on board. The product was much cheaper at between $400 and $500 a tonne in neighbouring Indonesia.
But premium-quality powder was still being offered at $900 to 1,100 a tonne in Malaysia, said dealers. "We saw some buying interest for powder but that doesn't do anything to the market.
The demand is too small to lift prices," said the grinder. Grinders in Asia have been hit by mounting stocks of powder, forcing some to rent warehouses as factories run out of space.
A steady demand for cocoa butter, a key ingredient for chocolate, offered little help. When processing beans, grinders get cocoa cake, which is later pressed into powder. Grinders also get butter, a key ingredient for making chocolate. Cocoa butter ratios were steady at 3.04 to 3.05 times London futures for prompt shipments. Prices for butter are determined by multiplying the ratio with related Liffe contracts. Grinders started cutting down on output late last year to ease powder stocks but the move may take some time to have an effect.