Agri Business

Modest rebound in global cocoa grind seen in 2015-16 season

| | Updated on: Oct 12, 2015
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Global cocoa grindings should start to climb in the 2015-16 season, after a poor year hit by weak margins and higher chocolate prices that curbed demand, although the pace of any advance is likely to be modest as economic woes curb chocolate demand in emerging markets such as Brazil.

"I think we will see a rebound in grindings but probably only a small one, maybe in the order of two per cent for the 2015-16 season," said Jonathan Parkman, head of agriculture at broker Marex Spectron, adding that projection assumed prices would stay around current levels.

The final set of quarterly grinding figures for the 2014-15 season (October/September) are due to be issued shortly with European data scheduled for Wednesday and North America's report the following day.

The European grind in the July-September quarter is expected to be flat with a year earlier which, if confirmed, would mean there was a decline of 2.2 per cent for 2014-15, though the range from the five analysts surveyed showed the quarter could be up by as much as 3 percent.

North America's latest quarterly grind is expected to be down between 2 and 10 per cent from last year's record high, according to eight analysts, while figures from Asia should show a drop of 5 to 10 per cent.

"Chocolate (demand) has been down, especially in the US. In Europe it has picked up, not year-over-year. It's flat year-over-year," one US trader said.

"They were buying hand-to-mouth due to higher futures prices," said John Palabrica, president of MJMB LLC, a private commodity trading company in Newark, Delaware, referring to the many small US chocolate makers who buy from grinders.

Analysts said some rebuilding of stocks could increase global grindings in 2015-16.

"Cote d'Ivoire (Ivory Coast) being the largest grinder in the world now will help drive it," Ecobank analyst Edward George said, noting the removal of an export tax would help boost cocoa processing in the West African country.

Top cocoa grower Ivory Coast overtook the Netherlands in 2014-15 as the world's leading cocoa processing country, according to International Cocoa Organization estimates, which pegged global grindings down 4 per cent in 2014/15.

Analysts said the current economic crisis in emerging markets should limit the scope of any rebound.

"If you go back a couple of years, all the chocolate makers were forecasting pretty dynamic growth in emerging markets. That was where the growth in consumption was going to come from," Parkman said, adding consumption in Brazil and other South American countries had been particularly disappointing.

Published on January 22, 2018

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