KUALA LUMPUR, Jan 12 — Cocoa processing in Malaysia slumped by a fifth to 55,590 tonnes in the fourth quarter, the Malaysian Cocoa Board said today, as sluggish demand and a bleak outlook forced grinders to cut down output.
Cocoa grinding, which reflects demand for chocolate’s key ingredient, dropped 14.4 per cent to 244,423 tonnes for the full year of 2014 from 285,608 tonnes in 2013, according to the board, without giving further details.
“The reality is, the grinding industry has not been profitable in the past one year,” said a cocoa trader based in Singapore. “It’s only a matter of time for people to reduce grinding, to reduce supply in the market.”
Cocoa beans, when ground, yields roughly equal parts butter and powder. Traders say demand for cocoa butter, which gives chocolate their melt-in-the-mouth quality, has been steady with global consumption growing between 1 per cent and 2 per cent this year.
But despite the recent growth in Asia’s grinding capacity, actual cocoa grinding has slowed over the last two quarters as supply of powder — used in cakes, biscuits and drinks — overwhelms demand.
Market participants expect 2015 to be bleak for the grinding sector, as mounting pressure to curb output will translate to higher costs per tonne.
“Most customers don’t think business will be fantastic this coming year. Everyone is cautious in the cocoa grinding industry,” the Singapore trader added, and expected grindings in the first quarter to remain flattish or drop further.
“Earlier on it was believed there will be good growth in Asia. There’s growth, but capacity has exceeded growth.”
Malaysia is Asia’s biggest cocoa grinder.
New York March cocoa closed at US$2,968 per tonne on Friday. Prices recorded a 7.4 per cent gain in 2014, after hitting a three-year high of US$3,399 in September.
The Cocoa Association of Asia is scheduled to release grinding data for the region on January 23. — Reuters
