Industry purchasing slowed in Europe's cash cocoa market this week on hopes for further falls in futures prices coupled with good supply cover, traders said on Friday. Talk of disappointing Easter retail chocolate sales also knocked sentiment.
"Ivory Coast seems to be heading for an ample crop and African export supplies are good," one cash trader said. "Supplies of cocoa are expected to be plentiful in coming months and industry anticipates downward pressure on futures, so delaying buying seems a good idea."
London futures remained inside their recent range this week but were pushed down by expectations of a positive mid-season crop in top exporter Ivory Coast which gets underway in April. "Ivory Coast and Ghana are both selling into upward spikes in futures markets which in turn confirms suspicions the upcoming mid crop will be ample and this is also limiting upward potential for futures," another trader said. "Port arrivals are also plentiful."
Differentials for good quality Ivory Coast beans for nearby delivery were little changed, quoted in the range of 45 to 60 pounds over London's May cocoa contract, the same as before Easter. Weak retail chocolate sales, especially in south Europe, means that another fall in European cocoa grindings is expected, traders said. The European Cocoa Association is due to publish Europe's first-quarter cocoa bean grinding statistics, a key illustration of the state of the processing industry, on April 17.
"I think the slack state of retail sales will mean a fall in first quarter grinding, especially because of low consumer spending in south EU countries undergoing big spending cuts because of the euro crisis," a trader said. Europe's fourth-quarter 2012 cocoa grind fell 6.2 percent on the year. Germany's fourth-quarter 2012 cocoa grind slumped 18.73 percent on the year.
Market talk continued that several big European cocoa grinding companies are operating well under capacity because of slack demand from confectionery producers. Processors may melt stocks of stored butter in block form for sale rather than grind more beans, traders said. Cocoa butter price ratios for April/May deliveries were at 1.89 times London's May cocoa bean contract, slightly up from 1.88 before Easter, but with talk of trade at lower levels during the week.