Strong profits drive Europe, North America cocoa processing

[CHICAGO] Strong processing profits probably kept cocoa processing at high rates in Europe and North America, according to a Bloomberg survey.

Grinding in Europe, the top-consuming region, likely rose 2 per cent in the fourth quarter to the highest for that period going back to 2001, the median estimate in a Bloomberg survey of 14 traders, brokers, processors and analysts showed. In North America, processing probably gained 2.5 per cent to the highest for that quarter since 2014, according to the median estimate.

Processing profits have been hovering around the highest in more than a decade in Europe and while a measure of grinding profitability has been in decline recently in the U.S., it's still at an elevated level compared with the previous 10 years, according to KnowledgeCharts, a unit of Commodity Analysis. The European Cocoa Association will release the data on Wednesday and the Washington-based National Confectioners Association the day after.

European processing probably rose to 360,352 metric tons in the fourth quarter from a year earlier. Survey responses ranged from no increase to a gain of 4 per cent. In North America, processing is seen at 118,982 tons, with responses varying from a 1 per cent gain to a 4.9 per cent. The total for both regions would still be lower than the previous quarter.

Demand is expanding in Asia too. Malaysian cocoa grindings jumped 23 per cent on year in the fourth quarter to 72,451 tons, according to the country's Cocoa Board on Tuesday. The Cocoa Association of Asia is scheduled to release data on Friday, covering processing in Malaysia as well as members in Singapore and Indonesia.

Cocoa futures traded in London jumped 28 per cent last year, partly helped by stronger demand. Prices are still below the five-year average, boosting the incentive to process. Goldman Sachs Group Inc. said it still expect stronger demand in 2019.

BLOOMBERG