KUALA LUMPUR, April 15 — Cocoa processing in Malaysia continued to slump in the first quarter of this year, the Malaysian Cocoa Board said today, as grinders slowed output in hopes that prices would improve.

Cocoa grinding, which reflects demand for the key ingredient in chocolate, fell 27.5 per cent to 45,208 tonnes in the Jan-March period from a year ago, according to the board.

Compared to the fourth quarter, grinding was down 18.7 per cent, the board said, without providing details.

“It's not surprising because everyone knows grinders are reducing volumes. It doesn't make sense to them if they keep grinding at high capacity, but selling at a loss,” said a cocoa trader in Singapore.

“Now it's just a waiting game for grinders. They are trying to hold back. When the market improves they will grind again.”

Butter ratios and powder prices strengthened in Asia last week as buyers banked on first quarter grinding results being lower, hit by product prices that remain below cost for much of the grinding industry.

Last year Malaysia's full-year grinding dropped more than 14 per cent, to 244,423 tonnes from 285,608 tonnes in 2013.

When ground, cocoa beans yield roughly equal parts powder and cocoa butter, which gives chocolates their melt-in-the-mouth quality.

Asian grinders are struggling with a shortage of beans and excess grinding capacity, which have pushed up bean prices and crimped grinders' profit margins.

“It's low season for cocoa beans in Asia now, so there's not a lot of beans in the market,” the trader added. “Whereas supply in the Ivory Coast and Ghana should be good.”

New York May cocoa closed at US$2,848 (RM10,570) per tonne yesterday, pulling off a 13-month low of US$2,669 touched on Feb 2.

The Cocoa Association of Asia is set to release grinding data for the region on April 24. — Reuters