Chocolate's move to luxury status cuts cocoa demand

[NEW YORK] The world's chocolate frenzy is finally starting to ease.

A dimming global economic outlook means that consumers are looking for ways to cut spending, and cocoa demand in 2015 will grow at the weakest pace in six years, Rabobank International predicts. At stake is the US$114 billion (S$155 billion) that Euromonitor Plc estimates will be spent globally on the sweet treat this year.

Slowing consumption comes after record buying helped propel three straight years of gains for cocoa futures. Higher ingredient costs prompted Hershey Co and Mondelez International Inc, the maker of Oreo cookies, to raise prices. The rally encouraged more output, and now demand is easing just after farmers gathered a record crop in Ivory Coast, the world's top producer. Cocoa-bean processing fell in Asia, Europe and North America in the fourth quarter, the peak season for sales, industry reports showed last month.

"Chocolate is one of those things that becomes a luxury in tough times," said Sameer Samana, a global strategist at Wells Fargo Investment Institute in St. Louis, which oversees US$1.6 trillion. "Chocoholics are realizing chocolate may be more of a want than a need. Once again, it seems that the world has plenty of cocoa, and that supplies won't be put into jeopardy."

Cocoa futures are down about 14 per cent since touching a three-year high in September. Prices that entered a bear market on Jan 29 will extend losses by 18 per cent to US$2,400 a metric ton by the end of the year, from US$2,931 on Friday, according the median of 10 estimates in a Bloomberg News survey. Futures rose 0.3 per cent to US$2,939 in New York on Tuesday.

"We expect chocolate demand to remain limited throughout most of the year, especially in Europe and Asia," Carlos Arzeno, commodity analyst for Rabobank International in London, said in a telephone interview.

"Demand has been relatively weak and arrivals in Ivory Coast have been improving as well."

BLOOMBERG