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European cocoa grind decline ‘disappointing’

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By Oliver Nieburg+

11-Jul-2014
Last updated on 11-Jul-2014 at 13:16 GMT

Europe's cocoa grind below expectations. Photo credit: Happy Days Photos and Art
Europe's cocoa grind below expectations. Photo credit: Happy Days Photos and Art

The amount of cocoa processed in Europe dropped 1% in the second quarter falling below traders’ expectations, but it's too soon to tell if chocolate demand is sliding.

“The consensus was that it was between unchanged and 3% higher so this is below expectations,” said one trader, who called the result, “disappointing”.

307,938 metric tons (MT) of cocoa was processed in Europe in Q2, compared to 310,188 MT last year.

The figures came from the European Cocoa Association (ECA) which collates grind data from 20 cocoa processors including Cargill, Barry Callebaut, Mondelēz and Nestlé.

“This is only part of the picture,” said the cocoa trader. Until grindings figures for other regions were released it was too soon to say that chocolate demand was falling globally, he said.

He added that global chocolate consumption was expected to rise 2-3% in 2014 compared to the previous year.

Rosier outlook for chocolate manufacturers

Jonathan Parkman, joint head of Agriculture at Marex Financial, had expected a 2-3% rise in European grindings: “Having a negative number surprised the whole market,” he said.

However, Parkman was positive on the chocolate industry’s future.

“The outlook for chocolate manufacturers is a bit rosier than a few months ago…I think we’ve reached a price where supply and demand is far more balanced.” He said that there had been more cocoa produced and less consumed than expected in the past year, dampening fears of a cocoa deficit.

6 months figures until Feb 2014. Source: Nielsen/Barry Callebaut half year results presentation

Cocoa deficit latest

The International Cocoa Organization (ICCO) last month estimated a cocoa surplus of 30,000 for the 2013/14 crop year, but said the market would return to a small deficit next year.

Parkman previously said at last month’s World Cocoa Conference in Amsterdam that if prices increased further there could be a structural surplus for 2015/16.

Cocoa on the London futures market stood at £1,946 ($3333) per MT on 1 July, 24% higher than the same time last year.

Asia and North America expectations

While European grindings fell as a whole, Germany recorded a 9% rise to 82,475 MT in Q2.

Europe and Russia account for 39% of the global grind, according to the ICCO. The Americas and Asia & Oceania are the next largest cocoa processors, each accounting for 21% of the global grind respectively.

“We’re expecting positive numbers in the US and in Asia as well,” said Parkman. He put the expected uptick in Asia down to a large increase in capacity in Indonesia, the region’s premier producer.”

The Q2 North American cocoa grind will be released by the National Confectioners Association (NCA) on 17 July. The Cocoa Association of Asia is expected to release its figures around the same date. 

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