Asian chocolate demand set to outstrip global growth

Asian demand for cocoa powder is expected to grow about 5% in the 2017-18 crop year © AP

Asian chocolate demand is likely to increase by about 3 to 4 per cent during the current crop year, exceeding that of global growth of about 2 per cent, according to the world’s largest trader of agricultural commodities.

“Demand for chocolate [in Asia] has been going up and continues to go up,” said Harold Poelma, president of Cargill’s cocoa and chocolate business. “Barring any major disruptions, we should have pretty decent growth this year.”

During September, cocoa prices moved in a narrow band. But prices have started the new marketing year on a fairly positive note thanks to forecasts of a rebound in demand, as chocolate companies and traders gathered for a conference in Singapore this week.

The cocoa benchmark traded in London has risen 3 per cent since the start of October, trading at £1,580 a tonne.

Mr Poelma’s comments have come as a relief for the cocoa market, which has suffered anaemic growth over the past few years due to volatile cocoa production and prices that have hit the demand for chocolate.

He added that Asian demand for cocoa powder, made from the beans and used for flavouring cakes, biscuits and beverages, would grow about 5 per cent in the 2017-18 crop year that started this month.

Cargill, the US agricultural trading house, is among the top cocoa bean traders and processors, along with Singapore’s Olam and Barry Callebaut of Switzerland.

Cocoa prices fell sharply earlier this year on concerns of a supply glut in west Africa, where more than 70 per cent of the commodity is produced, as well as stagnant demand for chocolate due to higher prices.

Rabobank, a leading lender to agricultural businesses, has predicted that with lower inventories in the US, prices may move upwards, prompting hedge funds and other speculators to try and cover their bearish bets.

The Dutch bank said it was bullish on prices, as after two years of negative growth in consumption, low prices were incentivising a recovery.

However, it warned that while processors were buying the beans it was likely that inventories of semi-finished products were increasing in an environment of low interest rates, increasing international trade and high margins.

The lender also saw consumer worries about sugar capping demand for chocolate both in developed and developing markets despite the falling cocoa bean prices.

Analysts at Commerzbank, meanwhile, forecast a modest price rebound in the coming year, thanks to weaker output in the Ivory Coast, the leading producer. The country’s cocoa production totalled a record 2m tonnes in the 2016-17 year.

The bank said pegged volumes of beans being processed had expanded by 4 per cent thanks to the price declines, led by production increases in Africa and Asia.

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