Strong chocolate demand seen boosting N. American cocoa processing

Reuters

* Q4 2013 N. American cocoa grind forecast up 5-7.4 pct * Cocoa grind data to be released Thursday at 2100 GMT * Butter ratio dropped to 2.65 in early January -CMAA By Marcy Nicholson NEW YORK, Jan 14 (Reuters) - Cocoa bean processing is expected to be up for a fifth straight quarter in the final three months of last year as chocolate makers scrambled to buy butter on stronger-than-expected demand, raising optimism for follow-through strength in 2014.

The National Confectioners Association will release North American fourth-quarter 2013 cocoa grind data on Thursday at 4 p.m. EST (2100 GMT), a day after European figures are expected to be announced.

Analysts contacted by Reuters estimated the North American cocoa processing data, a traditional indicator of demand for the key ingredient in chocolate, will be up 5-7.4 percent from the fourth quarter of 2012.

Higher-than-expected demand for cocoa butter in the second half of 2013 when manufacturers produce seasonal chocolate for Halloween, Christmas and Valentine's Day, caused many to scramble for spot supplies. This pushed the butter price ratio to an eight-year high above 3.0 in October.

Butter is one of the main byproducts of the cocoa bean that gives chocolate its melt-in-the-mouth texture. Last week the ratio continued to ease, reaching 2.65, the Cocoa Merchants Association of America website showed. This equates to just under $7,200 per tonne, still a historically high price.

"Better demand both domestically and from Asia combined with strong butter demand kept processors grinding away," said Citigroup Futures Specialist Sterling Smith, forecasting the fourth-quarter grind at 128,950 tonnes, up 7.4 percent.

U.S. Halloween chocolate sales in October, the biggest U.S. chocolate-selling holiday, were surprisingly strong at 5.5 percent higher than 2012 versus the expectation for a 1 percent rise.

On Tuesday, Swiss chocolate maker Lindt & Spruengli published a forecast-beating 8.6 percent rise in 2013 sales, due to strong growth in the U.S. and Canada.

In early December, the International Cocoa Organization widened its global cocoa deficit estimate in the 2012/13 marketing year that ended in September to 160,000 tonnes. Another deficit is currently expected by the industry, though if the fast pace of bean arrivals in top grower Ivory Coast continues, some analysts could change their forecasts.

Cocoa prices on the futures market are just above $2,700 per tonne, down just 3 percent from the highest level in more than two years reached in November at $2,840 due to global supply concerns.

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