Cocoa-Butter: buyers scarce

High cocoa butter ratios in Asia deterred chocolate makers this week, but grinders saw inquiries for powder from the Middle East ahead of the Muslim fasting month of Ramadan, dealers said on Friday.

The ratios were unchanged at a four-year high at 2.0 times London futures and traded at that level this month, but grinders may have to cut prices to attract buyers. Butter gives chocolate its melt-in-the-mouth texture.

"To be realistic, I think you need to go a little bit lower to below 2.0. Maybe at between 1.96 to 1.98 times. Most people are probably well covered. Ratios have to soften a bit so that we can move the butter," said a dealer in Singapore.

"I don't see powder prices moving down. At this moment people are probably holding back powder until they can sell butter. Most people are reluctant to sell powder at below $2,000 because of the losses they have suffered."

Cocoa beans are ground to produce roughly equal parts of butter and powder, which is used to make cakes, biscuits and drinks. Grinders usually lift butter ratios to offset losses in the powder market or vice versa.

"Buyers offer to buy at 1.97 times while sellers are still quoting ratios at above 2.0. It hasn't been traded," said another dealer in Singapore.

Butter prices are determined by multiplying the ratio, whose value is set by grinders, with relevant London cocoa or New York futures.

Butter ratios have been fuelled by supply concerns after Asian grindings fell nearly 11 percent in the first quarter of 2013 to their lowest in more than two years.

The Cocoa Association of Asia gave no reasons for the decline, but dealers said grinders had cut output because of sagging demand for powder, whose prices have fallen more than a third since January.

Powder prices were unchanged at $2,100 to $2,300 a tonne in Asia, but some grinders could lift prices to offset a sluggish butter market.

"I think powder should be in the region of $2,500 to $2,600, because bean prices have been on the rise and butter ratios are so high despite the absence of buyers," said a grinder in Malaysia.

"Demand for powder from the Middle East is picking up. We've sold a lot to countries such as Iraq. This week, there are inquiries from the Middle East, but I don't know whether they are keen to buy or not."

Chocolate sales normally surge in the main consumer regions of Europe and North America during celebrations of Christmas, Valentine's Day and Easter, but demand in Asia has also risen steadily over the last few years as growing affluence has given consumers a taste for sweets. (Editing by Clarence Fernandez)