Cocoa prices rebounded strongly despite another set of data signalling
a drop in demand for beans – this time from Asia, where the grind fell even
further than in Europe and North America.
The Asian cocoa grind, at 144,738 tonnes, was 9.3% lower in
the January-to-March quarter than a year before, data from the Cocoa
Association of Asia showed.
That is bigger than the 5.8% drop for the quarter reported
for North America, and the 1.6% decline for Europe.
It was also represented the weakest start to the year for
cocoa grinding volumes since at last 2010.
Nonetheless, cocoa futures for July closed up 3.0% at $2,885
a tonne in New York, the contract's best close in six weeks, while ending up
2.2% to £1,979 a tonne.
Weakness in the dollar was seen as playing a role the
outperformance in New York, in improving the competitiveness on export markets
of dollar-denominated supplies.
Furthermore, many investors had expected an even bigger drop
in the Asian grind that the 9.3% reported, with some seeing a drop of as much
Data for Malaysia already reported had shown a 27.5% drop,
year on year.
The Asian grind figure for the latest quarter – which
include statistics for Singapore and Indonesia as well as Malaysia - also
showed a small increase, of 2.4%, on that the figure for the October-to-December
'Sign of desperation'
However, the data were not taken as upbeat by all investors.
"I think if you're taking a fall in grind numbers as a
bullish signal, that's a sign of desperation," said Edward George, head of
commodity research at West African bank Ecobank.
He flagged that the market remained bearish "because of the
strength of production" in many countries, including Ivory Coast, the top grower
"It's very unclear
what's happening in Ghana," the second-ranked cocoa producer, said Mr George.
But in Ivory Coast, output "really is gathering momentum,
and could even produce 2m tonnes next season, particularly if the [country's
cocoa regulator] raises the farmgate prices".
At New York-based Price Futures, Jack Scoville said that "the
weather in general seems good for cocoa production", although acknowledging
that in Ghana deliveries of cocoa at ports is "well behind last year as dry
conditions earlier in the growing season has hurt production potential".
Still, for West African as a while, with the rainy season
under way, "some very favourable rains have been reported in the last month.
"Producers in the Ivory Coast are now hopeful for a very
strong mid-crop, and they have been delivering cocoa as arrivals at ports
continue to be above year ago figures."