Cocoa butter price ratios for nearby delivery were again firm in Europe's cash cocoa market this week on brisk industry demand, but surging cocoa futures braked demand for beans, traders said on Friday. "Industry has been buying hand-to-mouth supplies of cocoa butter in the hope futures will fall but the continued rise in futures is compelling them to buy," one trader said.
Cocoa butter for spot delivery rose to 2.51 to 2.52 times London cocoa futures from 2.50 times London last week and only 2.41 in early February. Cocoa butter is a key ingredient giving chocolate its melt-in-the-mouth taste. Butter prices are set by multiplying London cocoa futures by the ratio. "The recent rise in ratios for deferred delivery dates slackened off this week with most demand I saw for sport delivery," another trader said. "There was lower demand for later delivery dates after heavy purchasing in the past three weeks for delivery in the second half of 2014 and into 2015."
May/June delivery butter dipped to 2.49 times London contracts from 2.50 last week. Surging cocoa futures braked demand for cocoa beans and low demand sometimes made bean price differentials nominal, traders said. Differentials for good quality Ivory Coast beans for April/May delivery were unchanged on the week at around 70 pounds over London's May bean contract.
The London Liffe benchmark May cocoa contract on Tuesday hit a 2-1/2-year high of 1,888 pounds with a new high of 1,893 pounds touched on Friday, supported technical buying and an expected global deficit in the 2013/14 season. "Industry could see no new fundamental news about cocoa this week to justify such a major rise in futures," a trader said. "To me this week was another illustration of how speculative money dominates cocoa futures." "The chocolate industry also buys cocoa futures as cover when futures dip, which this week helped stop futures falling back after they consolidate after rising. This creates a vicious circle and is helping to keep futures high."