Asia Cocoa -Butter trade freezes, bean futures hit multi-year highs

Reuters

* Butter untraded, ratios quoted as high as 2.50 times London

* Powder prices vary, no reports of deals

By Lewa Pardomuan

SINGAPORE, Aug 8 (Reuters) - Cocoa butter trade came to a standstill in Asia this week after bean futures spiked to their highest in three years on speculative buying, turning off demand from chocolate makers, dealers said on Friday.

London cocoa futures have rallied about 16 percent this year on expectations demand will outstrip supply in the current 2013/14 crop year. December cocoa ended up 3 pounds at 2,005 pounds a tonne tonne on Thursday, just below Monday's three-year high of 2,011 pounds.

Butter prices, which have climbed in recent months, stood as high as $8,400 a tonne, compared with about $6,800 in January. Butter prices are calculated by multiplying London and New York bean futures by the ratios, which are set by grinders.

"The high bean prices are affecting grinders. Now, butter has become so expensive that people have stopped buying, while powder is not moving at all," said a dealer in Singapore. "So your processing margin is reduced."

When processed by grinders, cocoa beans yield roughly equal parts butter, which gives chocolate its melt-in-the-mouth texture, and powder, which is used in cakes, biscuits and drinks.

Butter ratios were mostly quoted at 2.47 to 2.50 times London futures this week, unchanged from last week. There were also offers at 2.40 to 2.42 times London.

"Nothing seems to be making sense in cocoa now. London prices are extremely high. You may want to do combo deals at ratios of 2.9 times, but still, how to make money?" asked a dealer in Indonesia.

"Butter ratios are still high in Asia but the question is whether anybody is really selling?"

In "combo" or combination deals, grinders pair the sales of butter and powder to prevent a build-up in stocks. Grinders will then sell butter at a fixed, but smaller, ratio on condition the buyer also takes some powder.

Dealers said grinders should at least sell butter at ratios of 3.0 times futures in a combo deal to make some profits.

Soaring cocoa costs ate into Nestle SA's confectionery profits in the first half of 2014, the company said on Thursday.

Cocoa bean prices have been on a meteoric rise for the past year as speculative buying poured into the market. This caused chocolate makers such as Nestle, Mondelez International , Mars Chocolate North America and Hershey Co to raise chocolate prices in recent months.

The powder market in Asia was also deserted. Powder prices were quoted in a wide range of $1,500 to as high as $2,100, reflecting thin trade.

(Editing by Biju Dwarakanath)

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