The fall of London cocoa prices from their recent peaks this week helped spark industrial buying but price differentials remained high, traders said on Friday. Low cocoa supplies arriving on international markets from top cocoa exporter Ivory Coast, coupled with continued concern about low Ivory Coast quality, have contributed to rising cocoa futures since November.
Trades at differentials as high as 160 pounds over London futures for good quality Ivory Coast beans were reported, up from 100 pounds over before Christmas. Differentials for Ghana, the main high-quality alternative origin to Ivory Coast, remained high but little changed at 230 to 250 pounds over London, but with supplies also tight.
The pound's general weakness against the euro also helped generate purchasing by euro zone industry. The latest export figures from Ivory Coast were poor, with cocoa arrivals at the country's ports reaching only 506,714 tonnes by December 31, down from 763,816 tonnes in the same period a year ago, according to data from exporters obtained by Reuters on Friday.
This led to belief that both differentials and futures were likely to remain firm. "Industry has undertaken hand-to-mouth purchasing in recent months in the hopes that futures prices would fall substantially, but as this is not happening some have had to bite the bullet this week," a second trader said. "Even a small downward price spike is attractive."
But traders said Christmas period chocolate sales in several west European countries appeared better than feared and that confectionery output could remain stable despite the poor economic outlook. "European cocoa grinding figures this week were positive in that they at least edged up and did not collapse," a third trader said. "Grinding is not the same as chocolate consumption but at least the grindings are showing that industrial processing is continuing at a stable level."
Europe's cocoa grind edged up 0.1 percent year-on-year to 349,351 tonnes in the fourth quarter of 2008, the Brussels-based European Cocoa Association (ECA) said on Wednesday. Meanwhile, European cocoa butter ratios were weak, with nearby delivery quoted around 2.51 times London against 2.65 in late December. "Demand for cocoa butter was low this week from both trade and industry," a butter trader said.