Barry Callebaut underlined the elevated level of cocoa grinding
margins, driven by "tight supply" of processing products besides weak bean
prices, at a time when it had achieved higher-than-expected sales too.
The Swiss-based group, the world's biggest chocolate and
cocoa product maker, said that the so-called "combined ratio" - the value of
the two main processing products, butter and powder, compared with the price of
the raw beans – had hit 3.5.
The "high" figure, up from a 3.12 a year ago, reflected "tight
supply" of the processing products and "historically low cocoa bean prices",
with New York futures, at $1,842 a tonne on Thursday for September delivery,
remaining not far above a near-10-year lows of $1,756 a tonne reached in April.
"Very favourable weather conditions in the two main cocoa
growing countries, Côte d'Ivoire and Ghana, and therefore a good crop resulting
in a surplus, were the main fundamental drivers for the [cocoa] price drop," Barry
The strong combined ratio reflected in particular strength in
prices of cocoa butter, credited with giving chocolate its melt in the mouth
quality, rather than the powder used to flavour the likes of drinks and biscuits.
This dynamic reflects indeed moves in other sectors, with
fat premiums having risen sharply in the global dairy and US meat markets too.
Other commentators too have flagged the elevated combined
ratio, with soft commodities analyst Judith Ganes-Chase earlier this week
noting that "the price ratio of cocoa butter and powder combined compared to
cocoa beans remains at historically high levels".
She added that "this should encourage strong grind" activity
by cocoa processors to exploit the widened margin, flagging expectations that
the quarterly round of industry bean processing data, for the April-to-June
period, should prove "fairly good".
Data so far has shown the Western European grind up 2.1% year
on year for the quarter, and that in Côte d'Ivoire up 14% at 389,000 tonnes for
the October-to-June period.
The rises are coming at a time of some recovery in demand
for chocolate too, with Barry Callebaut noting data from Nielsen showing that while
the global market was down 0.9% since August last year by volume, it had "recently
bounced back with a growth of 2.3%" for the February-to-April period.
The European market had returned to growth of 0.9% for the February-to-April
period, while that in the Americas "rebounded" to show 4.7% growth.
Still, Barry Callebaut, which has tapped increasingly into
gourmet chocolate markets to escape the pressure on consumer brands from a
quest for healthier snacks, outpaced world growth, reporting an increase of 5.5%
in volumes, for February-to-April.
That was ahead of market forecasts for 4.7% expansion
Revenues for the August-to-April period were up 3.7% at
SFr5.19bn, some SFr50m ahead of analysts' expectations.
Nonetheless, Barry Callebaut shares lost early gains to
stand down 0.7% at SFr1332 in lunchtime deals.