Cocoa grindings growth seen slowing in 2011-12

Global cocoa grindings are expected to slow in 2011/12, reverting to historical averages of 3 percent annual growth, as a deteriorating economic outlook dampens demand, even though the latest European quarterly grindings rose sharply. Rather than an indication of rapid demand growth in Europe, where around 40 percent of the world's cocoa is consumed, the increase in quarterly grindings is due to processors catching up after exports of beans stopped in top cocoa grower Ivory Coast during conflict after a disputed presidential election.
"For 2011/12 we expect to see a continued positive trend in the cocoa processing activity, albeit at a lower and more sustainable pace," said a spokesperson at Cargill, whose processing and chocolate-making plants are where around 15 percent of the world's cocoa ends up.
Last month the European Cocoa Association reported a 14 percent rise in July-September quarterly grindings compared with the same period a year ago, exceeding analysts expectations. The unexpected sharp rise in European grindings caused upward revisions to global 2010/11 (October-September) grindings growth estimates.
Commodities broker Marex Spectron estimates global 2010/11 grindings grew 4.4 percent on the year, but that growth will slow to 2 percent in 2011/12. The International Cocoa Organisation (ICCO) also sees a slowdown in grindings, forecasting 2011/12 would see a reversion to the long-term average of around 3 percent growth, from around 4 percent in 2010/11. "We don't feel that there is adequate incentive for demand to increase at this pace in the next season, the economic situation is not very good, the main factor for grindings is economic growth," said Laurent Pipitone, statician of the ICCO.
IVORY COAST IMPACT A disputed presidential election, leading to a ban on cocoa exports, and unreliable power supplies at local processing plants, brought top producer Ivory Coast's industry to a standstill earlier this year. This boosted the utilisation of processing capacity in Europe. "The situation in Côte d'Ivoire disrupted exports of cocoa products from the country and at the time it was not possible to foresee how long these disruptions would persist," the spokesperson at Cargill said.