Cocoa Grinding in Asia Climbs as Demand for Chocolate Increases

Jul 18, 2014 5:28 am ET

July 18 (Bloomberg) -- Cocoa processing in Asia rose in the second quarter on surging consumption of chocolate in the region, spurring buyers to search for more supply.

The so-called grind, an indication of demand, rose 5.2 percent to 161,805 metric tons in the three months ended June from 153,792 tons a year earlier, the Singapore-based Cocoa Association of Asia said in an e-mailed statement today. The figures are for Malaysia and members in Singapore and Indonesia, according to its website. The beans are processed into butter and powder used to make chocolate.

Cocoa climbed 31 percent in the past year in New York on rising demand in emerging markets including China and India, which may widen a shortage into the next decade. The global bean deficit may reach 1 million tons by 2020, according to Hardman & Co., a London-based research firm. Ivory Coast, Ghana and Indonesia are the world’s top cocoa growers.

“Supply is a little bit better than what people initially thought from the Ivory Coast, but demand has also been a little softer,” Wayne Gordon, a commodities analyst at UBS AG, said by phone in Singapore. “In Asia, we recognize that irrespective of the fact that a number of the economies are sort of quite volatile, and in particular China has been quite slow in the first half, the actual underlying demand has been very robust.”

While demand in the Asian region was ranked as the world’s lowest per capita in 2013, the market will grow at almost twice the global rate over the next four years, according to researcher Euromonitor International Ltd. Asian demand expanded 4.5 percent last year, the fastest rate in the world and almost six times the global increase of 0.8 percent.

Consumption Powerhouse

Asia, home to about 3.7 billion people, or more than half the world’s population, will be the consumption “powerhouse” for cocoa and chocolate, said Gerard Manley, a managing director at Singapore-based Olam International Ltd., which supplies about 10 percent of world beans. The shortage will push up prices at least 10 percent through the end of 2014, he said on June 10.

The contract for delivery in September rose 0.2 percent to $3,070 a ton on ICE Futures U.S. today. Futures reached $3,149 on July 3, the highest since August 2011.

Bean processing in Europe, which accounts for about 40 percent of global grindings, declined 0.7 percent to 307,938 tons in the second quarter from a year earlier, European Cocoa Association data showed on July 10. North America cocoa grinding climbed 4.5 percent to 131,737 tons in the April-June period, the National Confectioners Association said yesterday.