Price differentials in Europe's cash cocoa market were firm this week because of low sales from origin suppliers, especially Ivory Coast, traders said on Friday. "Farmers in Ivory Coast are not selling as they appear to be unhappy about the current general low level of cocoa prices despite the spike this week," one trader said. "Less cocoa is being offered on the market and seems to be being retained up country in Ivory Coast, the low arrivals figures underline this."
Cocoa arrivals at ports in top grower Ivory Coast reached 90,609 tonnes by October 31, down from 108,711 tonnes in the same period a year ago, Reuters reported on Friday. Cocoa futures rose sharply this week but have been falling steadily since early September, hitting a two-year-low on October 18 partly on prospects for a good Ivory Coast crop. European cash market differentials for good quality Ivory Coast beans were unchanged on the week at around 75 pounds over nearby London futures contracts.
"Normally differentials would be cut to reflect a rise in futures but this did not happen this week," another trader said. Industry purchase interest was reduced as cocoa futures rose this week, traders said. Cocoa futures firmed as part of a general recovery in commodities on midweek indications Greece would scrap its planned referendum on the euro rescue.
"Greece rather spoilt the market this week for European industry as cocoa prices rose against the downward trend and against the expectations of a record Ivory Coast crop this year, a trader said. "I think a lot of industrial buyers pulled out as futures moved up. Industry expects that the good crop prospects in West Africa will pressure prices again."
"I think the chocolate industry has pretty good supply cover for the coming months and can wait out. But the semi-finished products industry has lower supply cover." The continued concerns about the euro zone debt crisis and its impact on consumer spending was also weakening buying interest, traders said.
Price ratios for cocoa butter, a key chocolate ingredient, continued to fall. Butter for nearby delivery was offered as low as 0.98 times the London December cocoa contract on Friday, down from 1.1 in early October and 1.3 in July. But some producers were still demanding ratios of between 1.00 and 1.15 on Friday, declining to cut below the 1.00 level. The background for low ratios was said to be continued strong demand for cocoa powder, especially for chocolate drinks, and powder export demand from Asia. But butter demand is relatively weak because of sluggish chocolate sales.
"When grinders produce more powder they also produce more butter," a trader said. "Butter output has been stronger than demand for some time and stocks are rising." "People are now waiting to see how the crucial Christmas season chocolate sales perform before making decisions about butter buying for Easter production." Plans by Ivory Coast's government to reform the country's cocoa market gained great interest. "We need more details before you can make a judgement on it but I think if it reduces corruption it would be welcome," a trader said.