Analyst sees 2011 recovery as European cocoa grindings rise

By Jane Byrne

- Last updated on GMT

Related tags: Cocoa, Cocoa bean, Chocolate, Côte d'ivoire, European cocoa association

European cocoa grindings in the first quarter of 2010 rose 8.1 per cent on the year, the biggest first-quarter gain in four years, according to data from the European Cocoa Association (ECA) but an industry insider claims a double-digit hike would have lent recovery hopes more weight.

The ECA groups the major companies involved in the cocoa bean trade and processing, in warehousing and related logistical activities in Europe, with its members representing two-thirds of Europe’s cocoa beans grinding, half of Europe's industrial chocolate production and 40 per cent of global cocoa liquor, butter and powder output.

And, reflecting the overall European trend, the association of German confectionery producers, BDSI, revealed yesterday that Germany's cocoa grind in the first three months of 2010 reached 88,688 tonnes, which marked a 10.31 per cent rise on the year.

Cocoa grinding data is an indicator of demand and this increase in the figures for the first quarter of 2010 was expected by industry analysts following sharp declines in cocoa prices in recent weeks, subsequent to their reaching a 33-year high in December 2009 in London due to a poor main crop in West Africa and heavy speculative buying.

But one market analyst, who did not want to be identified, told ConfectioneryNews.com that a 10 per cent increase on the year in Europe wide grindings would have been a more constructive marker that recovery for the global chocolate market in 2010 was ensured.

He said though that predictions now were for a much lower deficit in cocoa supply for 2009/2010 than the originally touted 200,000 tonnage, with a good cocoa crop expected based on yields emerging as a result of the recent high prices filtering down to the growers coupled with good weather conditions.

“Some analysts are even expecting a surplus,”​ said the Netherlands-based trader.

The 2010 European figures contrast sharply with cocoa grinding data for the first-quarter of 2009, when demand was hit by the global recession. A percentage of chocolate producers then decreased their chocolate bar size rather than pass on prices to consumers, and cocoa consumption also decreased as a result of consumers purchasing less high-quality chocolate.

According to the industry analyst, cocoa processors are far less cautious now and recent months have seen a hike in cocoa liquor, butter and powder purchases as a result. And he expects festive purchasing at Halloween and Christmas to help significantly with 2010 earnings for chocolate manufactures.

However, the confectionery sector insider claims that it will be 2011 before a real recovery will kick in for the industry.

Meanwhile, according to Reuters, truckers involved in transporting the Ivory Coast's cocoa supplies today joined a strike against fuel price hikes.

Cocoa markets are sensitive to signs of disruption. However, a three-day strike by a union of cocoa cooperatives last October did not have a great impact on supplies from the top cocoa producer.

Related topics: Commodities, Cocoa & Sugar

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