By Ese Erheriene
Cocoa consumption fell surprisingly sharply in the final months
of 2014, a sign the broader global slowdown is having an effect on
even those with a sweet tooth.
Data published Thursday showed the processing of cocoa beans in
Europe fell 7.4% on the year in the fourth quarter to 323,061
metric tons. The figure published by the European Cocoa Association
was well below market expectations of a decline of between 2% and
5%.
In North America, cocoa grindings slipped 2% in the
October-December quarter. North American factories processed
122,886 metric tons of cocoa beans, according to data from the
National Confectioners Association, compared with 125,332 tons in
the fourth quarter of 2013.
Some analysts had predicted the grindings would rise from the
previous year, although estimates ranged from a 4% decrease to a 4%
increase.
The drops are seen as a broader indicator of a slump in demand
for chocolate, in an environment of weak global growth. Europe is
by far the biggest consumer and producer of chocolate, accounting
for about 40% of the global production of cocoa liquor, cocoa
butter and cocoa powder.
"We interpret the grind data as a sign of a weaker demand
environment," said Cargill Inc., one of the world's biggest cocoa
processors, in a written response to questions. "We expect this
environment to persist in the coming quarter."
The U.S. food giant recently made a big bet on chocolate demand
in Asia, investing $100 million to build a cocoa-processing
facility in Indonesia, the world's third-largest grower of cocoa
beans.
Others have too. In December, Singapore-based trader Olam
International Ltd. agreed to buy Archer Daniels Midland Co.'s
global cocoa operations for $1.3 billion, adding eight factories
with 600,000 metric tons of annual production capacity.
Cargill, which is a member of the ECA and contributes its
processing data to the overall regional tally, said Germany was the
main driver of the decline in the fourth quarter, with the
country's grindings down 14% from a year ago.
"The grind data in Europe should be read in global context,
considering also the dynamics in Africa and Asia. We estimate that
grind in Africa increased, especially in Ivory Coast, whereas we
expect that grind in Asia declined in the fourth quarter, likely in
the double-digit range," Cargill said.
Earlier this month, data from Malaysia---another major cocoa
producer---showed grindings there were down by roughly 20% on the
year. A clearer picture will emerge once data from the Cocoa
Association of Asia is published Jan. 21.
The processing data out of Asia is likely to be weak, given
Malaysia's report, said Jonathan Parkman, joint head of agriculture
at London-based broker Marex Spectron. "Overall, it looks
quarter-on-quarter like the global grind is actually going to be
down quite significantly on this time last year."
On Thursday, cocoa futures for delivery in March ended down 0.5%
at $2,977 a ton on the ICE Futures U.S. exchange.
Leslie Josephs contributed to this article.
Write to Ese Erheriene at ese.erheriene@wsj.com
Access Investor Kit for Archer Daniels Midland Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0394831020
Subscribe to WSJ: http://online.wsj.com?mod=djnwires