Cocoa powder demand appears to be on a rebound, as indicated by strong second-quarter grind data both domestically and globally, even if cash powder prices have yet to reflect a turnaround and remain at four-year lows. Cocoa bean futures prices have risen about 10% since late June.

Cocoa bean grind data for the April-June quarter released the week of July 15 reflected the strongest numbers for two years in Europe, the world’s highest per capita chocolate consuming region, and was one of the best quarters ever for North America. Grind in Asia, which is seen as the key region for chocolate growth, also posted stronger numbers compared with a year ago.


Second-quarter cocoa bean grind in North America, which includes processors in the United States, Canada and Mexico, was reported at 126,044 tonnes, up 12% from the same quarter a year ago, the National Confectioners Association said on July 18. The increase in grinding was far above expectations of a 3% to 5% rise. Second-quarter grindings were the highest of any quarter for the past two years, including the third quarter, which tends to see the strongest grind seasonally. Cocoa bean grind for the first six months of 2013 was up 9% from the same period in 2012. Longer-term comparisons of grind are difficult because data were reported just for the United States prior to 2011 and has since included all of North America.

The European Cocoa Association reported second-quarter grind in Europe at 310,408 tonnes, an increase of 6% from the same quarter in 2012, which admittedly was one of the weaker quarters in the past several years. Despite disappointing first-quarter numbers, grind for the first half of the year still was up about 1% from the same period in 2012. Second-quarter grind in Europe was 5% below the recent five-year average of 325,645 tonnes, but was 2% above the 10-year average of 303,731 tonnes. The five-year average is skewed by extremely strong grind of 355,763 tonnes in the second quarter of 2011, the highest on record for the quarter and the second highest of any quarter over the past 15 years.

In Asia, reflecting grind in Malaysia, Singapore and Indonesia, second-quarter grindings were reported at 153,792 tonnes, up 2% from with the same quarter a year ago, the Cocoa Association of Asia said.

Cautious optimism abounds

While somewhat cautious after just a single quarter of increased grind globally, traders and analysts suggest the gains were an indication demand for chocolate, which tends to be a discretionary purchase, may have turned the corner as economic conditions continue to improve. Although second-quarter cocoa bean grind was up in Europe, that region remains the “shakiest” of the three reporting regions as the economy there appears the slowest to recover from the lingering 2008 financial crises.

Another indication that chocolate demand is on the rebound may be reflected in rising prices for cocoa butter, which is used in greater volume in higher quality, thus more expensive, chocolate. The butterfat ratio, an indication of the value of cocoa butter, has more than doubled in the past year.

Prices for New York cocoa bean futures traded on ICE Futures US rebounded to 2½ week highs last week. The most actively traded September 2013 contract hovered near but mostly above $2,350 per tonne, up more than $200, or about 10%, from early July but still more than $50 below 2013 highs set in May. On a nearby continuous basis, September futures prices were modestly above year-ago levels that began climbing in July to set highs for the year above $2,700 a tonne in early September 2012. Cocoa bean futures traded on London’s LIFFE hit 2013 highs during the week of July 15.

Powder prices remain stagnant

Cocoa powder prices, meanwhile, have yet to reflect a recovery. Prices for the basic 10% to 12% natural powder currently are quoted from [email protected] a lb, down about 45% from a year ago and the lowest since 95c to $1.05 a lb in June 2009. Powder prices have declined steadily since setting highs at $2.50 a lb and above in May 2011. The highs were in part the result of excess cocoa butter stocks and reduced cocoa bean grind that was prompted by the 2008 economic crisis. The high prices spurred food processors to reduce cocoa use and/or find cheaper substitutes, which eventually sliced into demand.

The International Cocoa Organization’s most recent estimate of global cocoa bean grind was 3.99 million tonnes, up about 1% from 2011-12. The I.C.C.O. in May forecast a global cocoa bean deficit (use versus production for the current year) of 60,000 tonnes. But supplies will remain more than adequate because of ending stocks forecast at 1.77 million tonnes, equal to about 45% of 2012-13 production.

The cocoa and cocoa bean market currently is in its “quiet” season with the smaller midcrop harvest under way in top-producing West Africa. Harvest of the main crop begins around the start of the 2013-14 marketing year on Oct. 1, 2013. Third-quarter cocoa grind data will be released in mid-October, which may indicate if the recovery shown in the second quarter is continuing.