Cocoa Butter Ratios Said to Climb on Grinders' Purchases

The cost of cocoa butter relative to the price of beans climbed in Europe this week as processors bought the ingredient to avoid grinding more supplies, according to three traders with direct knowledge of the sales.

The butter, which accounts for as much as 20 percent of the weight of a chocolate bar, trades at a ratio to cocoa futures on the NYSE Liffe exchange in London. The ratio was at 1.35 to 1.4 this week, said the traders, who declined to be identified because they aren’t authorized to speak to the media. It was 1.3 to 1.35 last week, three traders said then.

The butter ratio in the European market has been climbing since at least June 1, when it was at 1.08, according to data from Commodities Risk Analysis LC, a Bethlehem, Pennsylvania- based cocoa research company. Grinders started buying butter after a decline in prices for cocoa powder, another by-product of bean processing.

Powder prices in Europe were at 3,122 euros ($3,840) a metric ton on Aug. 3, Commodities Risk Analysis data showed. The price reached a high of 4,100 euros a ton last year, according to founder Steven Haws. That reduced margins for processors and made cocoa grinding less attractive.

Cocoa processing in Europe fell 18 percent in the second quarter, according to the Brussels-based European Cocoa Association. In North America, grindings dropped 9.8 percent in the same period, according to the National Confectioners Association in Washington.

Singapore-based Petra Foods Ltd., which supplies cocoa products to Nestle SA, Mars Inc. and Barry Callebaut AG, said in an earnings statement this week it had reduced production and sales to the “price sensitive segment” and some markets including Eastern Europe. It also said chocolate consumption will be weak globally this year and commodity prices will show “volatility.”

Cocoa for December delivery was down 0.5 percent at 1,661 pounds ($2,595) a ton on NYSE Liffe in London as of 4:29 p.m., after earlier today climbing to 1,675 pounds, matching yesterday’s nine-month high.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.