Bloomberg News

Cocoa May Advance as Much as 13% on Demand, Macquarie Says

November 25, 2011

(Updates with prices in fifth paragraph.)

Nov. 25 (Bloomberg) -- Cocoa may rebound as much as 13 percent in the next two months in New York on demand for the chocolate ingredient during Christmas and Easter, according to Macquarie Group Ltd.

Cocoa may gain to $2,500 to $2,700 a metric ton on ICE Futures U.S., the bank estimated. Cocoa has fallen 25 percent in London and 21 percent in New York this year on speculation supplies will outpace demand for a second year in the 2011-12 season started last month.

“On the demand side, things still look positive,” Kona Haque, an analyst at the bank in London, wrote in a report dated yesterday. “Powder demand is still very strong, and EU and U.S. third quarter grindings were above expectations.”

Cocoa powder is used to make chocolate-based products such as ice-creams, biscuits, baked goods and soft drinks. Demand for powder is more prominent in emerging markets, especially Asia, according to Shawn Hackett, president of Hackett Financial Advisors Inc., a consultant based in Boynton Beach, Florida.

Cocoa for March delivery slipped 0.8 percent to $2,384 a ton by 7:46 a.m. on ICE Futures U.S. in New York, the lowest since May 2009. Cocoa for December delivery fell 0.9 percent to 1,504 pounds ($2,329) a ton on NYSE Liffe in London.

Global cocoa processing will rise 2.6 percent in the 2011-12 season, down from 3.9 percent a year ago, the bank estimated. The world market will have a “modest” surplus, it said.

“This means prices are likely to be lower than last season,” Haque said. “We no longer see $3,000 as a possibility.”

Demand for cocoa butter, which accounts for about 20 percent of the weight of a chocolate bar, remains slow, Macquarie said. Butter inventories are estimated at 200,000 tons, it added.

Interest in the product could rise as its price edges closer to that of vegetable oils, which can be used as a substitute, according to Haque.

“It may not be long before we see some substitution away from vegetable fats, back into cocoa butter.”

--Editors: Sharon Lindores, Nicholas Larkin

To contact the reporters on this story: Isis Almeida in London at ialmeida3@bloomberg.net Maria Kolesnikova at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net


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