Cocoa,Butter ratios soft; bean arrivals slow in Sulawesi

SINGAPORE: Cocoa butter ratios were a tad lower in Asia after recent gains in London futures put pressure on the value, but steady demand for powder in the second half of the year kept the product market alive, dealers said on Friday.

In the bean market, daily arrivals in Indonesia's main cocoa export port of Makassar were stagnant because of a bad harvest in the main growing island of Sulawesi. Indonesia's is the world's third-largest cocoa producer after the Ivory Coast and Ghana.

"We don't see many beans around. Daily arrivals reach 200 to 300 tonnes. In the past, arrivals could easily reach above 500 tonnes during the peak of the season," said an exporter in Makassar.

"We don't ship many beans either. Lately, we've been shipping beans only to Malaysia and Batam," said the dealer, referring to delivery to a new grinder owned by Malaysia's Guan Chong on Batam island off Sumatra.

Cocoa bean exports from Sulawesi dropped more than 40 percent to 64,591 tonnes in January-June after a combination of wet and dry weather hurt output in Sulawesi, which accounts for 75 percent of Indonesia's production.

Indonesia could see full-year output falling to its lowest since at least 2004 at 420,000 tonnes after erratic weather triggered the spread of a deadly fungal disease in Sulawesi.

Indonesia has been dealing with pests and diseases for years. Heavy rains in Sulawesi have once again triggered the spread of VSD, a disease that attacks branches, leaves and trunk, eventually killing the trees.

It exports beans to grinders in the United States, Brazil, Singapore and Malaysia, which is Asia's largest cocoa grinder.

Grinders in Malaysia and Singapore offered cocoa butter, a key ingredient for making chocolates, at 1.15 times to London futures , down slightly from 1.20 times last week.

Cocoa powder, however, was steady at $5,200 a tonne.

"Powder demand is still there, and also supply is very tight," said a dealer in Malaysia. "I would say butter ratios are down because of a combination of weak demand and a rebound in futures."

The Liffe September cocoa contract end down 28 pounds at 1,862 pounds a tonne on the prospect of a bumper crop in the current season, but it had rebounded from a five-week low at 1,856 pounds hit on Tuesday.

When processing beans, grinders get butter and cake, which are later pressed into powder. Butter is the key ingredient for making chocolate and is also used to make spreads and soaps, while powder is used for coatings in chocolate-making, beverages and ice cream.

Chocolate flies off the shelves in the main consuming regions of Europe and North America during Christmas at the end of the year, Valentine's Day in February, Easter in the spring, and other holidays.

Copyright Reuters, 2011