European cocoa processing up 3% in 2017 amid low bean prices

By Oliver Nieburg

- Last updated on GMT

Cocoa price drop rather than strong chocolate market sees Europe's cocoa grind rise in 2017 ©GettyImages/AnnaPustynnikova
Cocoa price drop rather than strong chocolate market sees Europe's cocoa grind rise in 2017 ©GettyImages/AnnaPustynnikova

Related tags Chocolate Cocoa

Europe’s cocoa grind has increased for the full year 2017 and fourth quarter as low cocoa prices made it more profitable to process.

However, cocoa prices are likely to increase this year leading to a slowdown in grindings, says a market analyst.

Grinds gain ground in Europe

European cocoa processing climbed 2.6% for the full year to 1,378,541 metric tons (MT), according to data released today by the European Cocoa Association (ECA).

The grind statistics from 22 companies, including Barry Callebaut, Cargill and Mondelēz International, showed a 4.4% rise in the fourth quarter (Q4) versus the same period in 2016 to 353,286 MT.

New reporting companies

French firm Cémoi and German company Confiserie Coppeneur et Compagnon became new reporting companies for the ECA’s grind stats from Q3 2017, while Stollwerck, part of the Baronie Group, stopped reporting to the ECA’s publication after Q2 2017.

Cocoa prices at 10-year low

“It's quite an impressive increase,”​ Laurent Pipitone, director and co-founder of Economic Development Insight, told ConfectioneryNews.

"The chocolate market [in Europe] is not that strong. The main factor for the rise in grinds is low cocoa prices,” ​continued the former director of the International Cocoa Organization’s (ICCO’s) economics and statistics division.

Cocoa prices averaged $1,917 on the London and New York markets in December 2017, according to the International Cocoa Organizations monthly averages of daily prices.

This was the lowest level since October 2007.

Strong margins for processors unlikely to continue

The combined cocoa ratio for butter and powder consequently reached 3.7, the highest level since 2005, making processing more profitable for grinders.

"Now we have very healthy ratios, so good margins for cocoa processors,"​ said Pipitone.

"It's probable this will not continue in 2018. We will probably see a slowdown in the growth of grindings."

Pipitone said he expects cocoa bean prices to recover slightly in 2018 and anticipates a very small surplus for the current cocoa year (October 2017 to September 2018).

A surge in global production

The last cocoa year (October 2016 to September 2017) ended with a global surplus of 335,000 MT, as world production (+18.5%) outstripped global grindings (+5.4), according to ICCO data.

Pipitone said the spike in global cocoa production came mainly because of strong weather conditions in the main growing nation Côte d'Ivoire.

Asked if company sustainability programs had helped create a market surplus and a crash in cocoa bean prices, he said: "In the past few years, we had stories about lack of cocoa and no more chocolate in 2020.

“This created an environment that led to farmers and producing countries to think that price will continue to increase in cocoa and that cocoa was a good investment.

“This has contributed to the increase in cocoa production and indeed initiatives to increase productivity have contributed to some extent."

Asia and North America

The Cocoa Association of Asia will report Q4 2017 cocoa grind statistics for the region on Thursday (January 18).

The US National Confectionery Association will release numbers for North America (Canada, Mexico and the US) on the same day.

Pipitone expects strong Q4 growth in Asia and modest growth in North America.

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