By ISIS ALMEIDA - November 13, 2012
rush hits record as cocoa shortages loom
grinders are increasing output by the most in
two years to meet record demand for chocolate,
at a time when declining West African supply means
the first shortages of beans in three seasons.
will jump 4.9 percent in the season that began
Oct. 1, according to Bethlehem, Pennsylvania-based
Commodities Risk Analysis LC, which has tracked
the market for 17 years. Chocolate sales will
climb 5.7 percent to $108 billion, London- based
Euromonitor International Ltd. estimates. Prices
will rise as much as 7.3 percent to 1,665 pounds
($2,646) a metric ton in the first half of 2013
in London, according to the mean of 17 analyst
estimates compiled by Bloomberg.
yield powder, used in cookies and ice cream, and butter,
which accounts for about 20 percent of a chocolate bar.
Grinders curbed output this year after powder demand
fell and they used stockpiled butter to supply candy
makers. Reserves are running out just as chocolate buying
accelerates and as harvests in the biggest cocoa growers
are crimped by dry weather. Processing will likely expand,
according to Barry Callebaut AG, which supplies chocolate
to Nestle SA and Hershey Co.
a good buy at the moment,” said Shawn Hackett, the president
of Hackett Financial Advisors Inc. in Boynton Beach,
Florida, whose prediction in February for a rally was
followed by a 15 percent rebound in three months. “When
cocoa powder demand comes back in the first half of
next year, the upside rebound in cocoa bean demand will
be much greater than it has been in the past.”
have climbed 12 percent to 1,552 pounds a ton on NYSE
Liffe since the start of January, they are poised for
the lowest annual average in four years. Hackett expects
a gain of as much as 40 percent in the first half of
2013 from now, he said on Nov. 7. The last time prices
rose more than 40 percent in the first half was in 2008.
& Poor’s GSCI Agricultural Index of eight commodities
advanced 8.7 percent this year as drought from the U.S.
to Europe to Australia drove grain and oilseed prices
higher. The MSCI All-Country World Index of equities
climbed 7.5 percent and Treasuries returned 2.7 percent,
a Bank of America Corp. index shows.
demand will boost profit for Barry Callebaut, which
also supplies Unilever, the maker of Magnum ice cream.
Zurich-based Barry Callebaut predicted average sales
volume growth of 6 percent to 8 percent in the next
four years, Juergen Steinemann, chief executive officer,
said in a media presentation on Nov. 7. That’s above
the long-term average growth of 2 percent to 3 percent
for global chocolate sales.
Grinders’ profitability is determined by the prices
of powder and butter divided by the cost of beans, the
so-called combined ratio. That rose to 3.13 on Nov.
9, from as low as 2.76 in May, Commodities Risk Analysis
will exceed production by 101,000 tons this season,
Macquarie Group Ltd. estimated in September. Rabobank
International predicts a 122,000-ton shortfall. Global
output will drop 2.9 percent to 3.85 million tons, led
by smaller harvests in Ivory Coast, Ghana, Indonesia
and Nigeria, Macquarie says. The four nations produce
74 percent of the world’s beans.
will be among the topics analyzed by the International
Cocoa Organization at its first-ever summit in Abidjan,
Ivory Coast, on Nov. 19. The London-based ICCO, which
has 41 consuming and producing member nations, is expecting
1,000 people to attend, according to Jean-Marc Anga,
the executive director of the ICCO and a native Ivorian.
deficit may worsen as accelerating growth in emerging
markets spurs demand. Advanced economies will grow 1.5
percent next year as developing nations expand 5.6 percent,
the International Monetary Fund predicts. That’s reflected
in Euromonitor’s forecasts for a 5.2 percent gain in
Asia-Pacific chocolate demand by volume, 4.6 percent
in Latin America, 1.3 percent in Western Europe and
little change in North America.
are also the biggest threat to the predicted gain in
prices. Grindings fell 6.5 percent in 2008-2009, the
biggest decline since at least 1960, as the global economy
endured its worst recession since World War II, ICCO
data show. Retail sales of chocolate contracted 1.3
percent, led by a 5.6 percent drop in North America,
according to Euromonitor. Western Europe accounts for
32 percent of global chocolate demand, followed by North
America at 20 percent, according to adviser KPMG LLP.
sales growth by tonnage was 1.5 percent this year, down
from 2.2 percent in 2011, Euromonitor data show. Growth
will rebound in 2013 to 2.2 percent and 2.3 percent
the following year. Chocolate consumption and grindings
were disconnected this season as processors used stockpiles,
said Steven Haws, founder of Commodities Risk Analysis
who has followed cocoa since 1979.
The IMF cut
its 2013 global growth forecast in July and October
and the economy of the 17-nation euro area probably
tumbled back into a recession in the third quarter,
the median of 25 economist estimates compiled by Bloomberg
show. The U.S. also risks returning to recession unless
lawmakers resolve the so-called fiscal cliff of automatic
tax increases and spending cuts scheduled to start in
2013, Fitch Ratings said Nov. 8.
been a pretty good link between global GDP growth and
the growth of chocolate consumption in the last 20 to
30 years and I don’t think you can just throw that link
away,” said Jonathan Parkman, the co-head of agriculture
at Marex Spectron Group in London. “Unless there is
a stronger-than- anticipated recovery in global GDP
growth, I don’t see where the surprise is going to come
from in chocolate consumption.”
First-half prices are also at risk because of pre-harvest
sales by the top growers. Ivory Coast, accounting for
37 percent of supply, introduced a policy in January
of state-backed forward sales to give farmers a price
guarantee that is 60 percent of the world market value.
Ghana has a similar program and the two are creating
an unprecedented amount of supply in futures markets
for the period and that may cap a rally.
contraction” in global cocoa processing last season
may reverse this year partly because of emerging market
demand, said Laurent Pipitone, the head of the ICCO’s
economics and statistics unit. The ICCO will report
the revision during the conference next week in Abidjan.
It last forecast growth of 0.4 percent in processing
bean grindings slid 18 percent in the second quarter
and 16 percent in the third, Brussels-based European
Cocoa Association data show. North American grindings
fell 9.8 percent in the second quarter and 2.2 percent
in the third, the National Confectioners Association
in Washington estimates.
inventories have contracted enough to spur factories
to raise output, according to Hackett. Barry Callebaut
also expects grindings to accelerate, Steinemann told
journalists on a conference call Nov. 7. European powder
prices dropped 19 percent this year as the relative
cost of butter jumped 38 percent, Commodities Risk Analysis
be fewer beans for the grinders to buy. Ghana will produce
less for a second year and Ivorian output will drop
to a three-year low after dry weather, Macquarie forecasts.
As much as 40 percent of the global crop is lost to
pests and disease every year, according to the ICCO.
An average cocoa tree produces about 30 usable pods
a year, yielding enough beans to make about 2 pounds
of dark chocolate, according to the website of Hershey,
the maker of Hershey’s, Reese’s and Kit Kat.
with a valid grading certificate in warehouses monitored
by NYSE Liffe dropped 39 percent this year by Oct. 29.
Money managers increased bullish bets almost 14 times
since March 6, when speculators began betting on higher
prices, exchange data yesterday show.
will report an 87 percent gain in net income to 265.8
million Swiss francs ($280 million) in its fiscal year
ending in August, based on the mean of 10 analyst estimates
compiled by Bloomberg. Its shares dropped 1.4 percent
to 913 francs in Zurich trading this year.
in a recession or some degree of slowdown for four or
five years now, so the initial shock has passed and
people are getting on with things,” said Lee Linthicum,
the head of food research at Euromonitor. “Before if
you went to a dinner party, you would bring a box of
Ferrero, but now it’s perfectly acceptable to bring
a box of private label. That’s supporting volume sales
regardless of the economic uncertainties.”